The 1031 exchange process can be overwhelming for those who have never been through it before. Arming yourself with a little bit of knowledge about the process can put your mind at ease. In this article, we are going to talk about what beginner’s need to know about the 1031 exchange process.
The Basics of Like-Kind Exchanges
First, let’s talk briefly about the basics of like-kind exchanges under section 1031 of the Internal Revenue Code. In essence, a 1031 exchange is an alternative to an outright sale of real estate, wherein you reinvest your sales proceeds into a like-kind replacement property. Doing so allows you to continue your investment and defer your capital gains taxes on the sale at the same time.
Qualifications
Before you get too excited, you need to determine whether or not your property qualifies for 1031 exchange treatment. 1031 exchanges are restricted to real estate. Personal property exchanges are not allowed.
Within the realm of real estate, there are further restrictions. The real estate used in a 1031 exchange (both the relinquished property and the replacement property) need to be like-kind and held for investment or business use. Any real estate held primarily for personal use (such as your primary home or residence) is not allowed in a 1031 exchange.
1031 Exchange May be a Good Fit for Your Property
If you own investment or business real estate, a 1031 exchange may be a good fit for your property. When you exchange your property in a 1031 transaction, you are able to defer your capital gains tax burden and put that money to use in a continued investment. A qualified intermediary who specializes in 1031 exchanges can help you through all the details of your 1031 exchange and make sure you fully understand the various rules and requirements. Contact CPEC1031, LLC today to learn more about the many benefits of the 1031 exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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