There are many terms that crop up during a 1031 exchange of real estate. In this article, we are going to talk about the four most important 1031 exchange terms that you should know.
Like-Kind
The first, and most important term to familiarize yourself with is “like-kind.” All property involved in a 1031 exchange needs to be of like-kind. Thankfully, this is pretty easy when you’re dealing with real estate exchanges. Most US real estate is like-kind to most other US real estate.
Qualified Intermediary
A qualified intermediary is a 1031 exchange professional who helps guide taxpayers through the details of their 1031 exchanges. Think of a qualified intermediary as your 1031 exchange advisor. They can also prepare the documents necessary for your 1031 exchange.
Boot
Boot is defined as any non-like-kind property that the taxpayer conducting the exchange receives during the exchange process. Receiving boot will trigger gain and result in only partial tax-deferral. As a result, it’s best to avoid receiving boot when you can.
Qualifying Purpose
One of the other fundamental rules of a 1031 exchange is that your property must be held for a qualifying purpose. Only property held for use in your trade or business can be exchanged in a 1031 transaction.
Defer Your Taxes with a 1031 Exchange
A 1031 exchange is a fantastic way to defer your capital gains taxes on the sale of real property and keep your hard-earned money working for you in a continued investment. At CPEC1031, LLCwe work with clients across the country to facilitate their 1031 exchanges of real estate. Our qualified intermediaries have decades of experience executing 1031 exchanges and can walk you through every step of the process. Reach out to our like-kind exchange professionals today if you have any questions about your real estate exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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