Why do a 1031 Exchange?
If the property you are selling is “real property” that has been held for business or investment use? Then the property should qualify for a 1031 Exchange. Are you planning on reinvesting the full sale proceeds from the sale of your property into another property that will be held for business or investment use? If yes, then you qualify for a 1031 Exchange.
What is a 1031 Exchange?
A 1031 Exchange allows the taxpayer, or seller, to defer the capital gains tax and depreciation recapture on the transaction. The property sold as part of a 1031 Exchange is called the Relinquished Property. The property purchased is the Replacement Property.
What are the rules and requirements for a successful 1031 Exchange?
For a 1031 Exchange to be in accordance with IRC § 1031, within 45-days of the close of the sale of the Relinquished Property the taxpayer must identify their potential replacement property(ies) in writing to the qualified intermediary.