The IRS, through Section § 1031 of the Internal Revenue Code or IRC, permits 1031 Tax Exchanges for nearly all types of real property (real estate) that is “held for productive use in trade or business or for investment,” including:
• Commercial office buldings
• Retail centers
• Industrial and warehouse buildings and complexes
• Rental properties: homes, apartments, condominiums, student housing and more
• Water and mineral rights (as applicable per state law)
• Raw land
There are several different types of 1031 Exchanges allowable within the Tax Code:
Deferred 1031 Exchange
Also known as a “Forward-Delayed Exchange”, a Deferred Exchange is the most common type of 1031 Exchange. The Exchanger first relinquishes (sells) property, then has 45 days to: A) acquire (buy) replacement property; or B) identify property to buy, within certain constraints, thereby typically gaining an additional 135 days to acquire any or all of the properties identified.
Improvement 1031 Exchange
Also known as Construction or Build-to-Suit Exchanges, this structure allows an Exchanger to use proceeds from the sale of one or more properties for replacement property acquisition and improvements or repairs. This type of Exchange is more involved, because an Exchange Accommodation Titleholder (EAT) is required. Such Exchanges may be Deferred or Reverse in nature, and depending on the structure of transactions, more than the standard 180-day Exchange Period may be allowable.
Reverse 1031 Exchange
Valuable when the Exchanger wishes to acquire new property in advance of relinquishing old property, the “Reverse Exchange” is somewhat complex – in terms of paperwork and transfer of ownership – but can be extremely valuable when timing is an issue.
Simultaneous 1031 Exchange
The Exchanger sells and buys properties on the same day – no money is held in Qualified Escrow.
Which type of 1031 Tax-Deferred Exchange is right for you? That depends on what you want to sell, what you want to buy, what the market is like for buying and selling your particular asset(s), and the timing that would most benefit you or your organization. For more information or to schedule a free 1031 consultation, please call toll-free (855) 313-7080, or email moc.11529362196301xe1529362196piuqe1529362196@ofni1529362196.
Would you like to know more about 1031 Exchanges? Click here for our 1031 Exchange FAQs.
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