§1031 Like-Kind Exchange

Save Capital Gains Tax on Investment Property

What is the Benefit?

A Like-Kind exchange can help you dispose of highly appreciated property and defer or eliminate capital gains. The exchange can help you switch from lower income properties to those offering a higher return. A Like-Kind exchange can help you switch from raw/agricultural land to a commercial rental property.

What is a like Kind Exchange

Internal Revenue Code §1031 provides for the deferred taxation of exchanges of certain investment properties. There are strict rules that must be followed in order for the exchange to work. In addition to both the old and new properties qualifying as “1031” property, the properties must be exchanged through a “Qualified Intermediary” within 180 days of the sale.

What a Like kind of Exchange is Not

This is not a vehicle for selling one vacation home and buying another. This is not a vehicle for exchanging one business for another (although the real estate involved with the business, as well as some other assets may qualify.) This is not a vehicle for immediately transferring ownership to your children (although this process can be an important estate planning tool!)

Steps to a Like-Kind Exchange

1. Selling property must be qualified 1031 property
2. The Agreement of sale should be designed for a Like-Kind Exchange by your tax lawyer.
3. The seller has 45 days from the date of settlement to specify a list of 1031 qualified exchange properties.
4. The Seller has 180 days from settlement to close on like-kind property from the list.