About 1031 Exchanges
A 1031 Exchange is the opportunity to reallocate the proceeds from the sale of a property to a like-kind property to defer capital gains taxes. It is named for Section 1031 of the Internal Revenue Code and you can exercise a 1031 with property that was used as commercial/business property or held as a personal investment.
Clearly, there are guidelines that must be met in the process, which is why a Qualified Intermediary is required to hold all of the proceeds and distribute them once the seller has identified the exchange property, which must be done within 45 days of closing on the relinquished property. Thus, it is advantageous to search for a replacement property as soon as possible, so preparation and timely execution are key to a successful exchange.
1031 exchanges are a very valuable wealth-building tool and the mark of a savvy real estate investor. Their popularity has grown to a point of being commplace in the world of real estate investing.