What is a 1031 Exchange
What is this 1031 Exchange that has become so popular with property owners? Basically, it is a way for someone to “ exchange” one property and for another property within a specified period of time, using the guidelines set forth in Section 1031 of the Internal Revenue Service Code and avoid paying capital gains tax.
The process of selling a property and then buying another property are practically identical to any other sell/buy situation, however a 1031 Exchange is different since the entire transaction is treated as an “exchange” and not a sale. This “exchange” is what allows the taxpayer to qualify for a deferred capital gains treatment, because the IRS considers “sales” taxable and 1031 exchanges not taxable.
Since there are IRS rules to follow, you will need to learn how a 1031 Exchange works in order to know if it is right for you. Only certain types of property qualify for this type of transaction and there are other important factors to consider such as the time frame in which the exchange must take place. Through the easy-to-understand (hopefully!) articles and resources supplied in this web site, we hope to bring you closer to a more thorough understand of how the process works.
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