1031 Exchange and Investments

1031 Exchange is an exchange where a property owner can sell his/her investment property to purchase an other like kind property of equal or higher value without paying any Federal income tax. Real properties generally are of like-kind, but real property in the United States and real property outside the United States are not like-kind properties.

If the new property is of lesser value, that can result in Boot. A Boot is anything of value exchanged which is not like kind to the relinquished property, in the form of either cash or releif of mortgage debt, in most cases.

Generally speaking sellers have 45 days form the close of the escrow to identify their next property the one they will be buying to exchange. Sellers have the choice of identifying more than one property. Escrow on next purchase must close with in 180 days from the day of the close of escrow on their first property.

Any money that comes form the first property should be placed with a third party called Accomodator. If this step in not performed in a timely manner, it can result in disualification of 1031 exchange and can result very expessive to the seller.

IRS Guidelines for 1031 Exchange




This page is solely for the information purposes, please contact your tax advisor before taking any action.