1031 Tax-Deferred Exchange

A 1031 Tax-Deferred Exchange allows the exchange of investment or business property for other investment or business property, without paying tax if the property received is "like kind." This allows you to roll-over all of the proceeds received from the sale of an investment property into the purchase of one or more other like-kind investment properties. At closing, proceeds are transferred to a third party--called a facilitator or qualified intermediary--who holds them until they are used to acquire the new property. The replacement property must be identified within 45 days & acquired within 180 days of the sale of the old property.

There are three elements involved:

1. Qualifying Property
Any rental or investment property in the United States is eligible. Personal residence or vacation home do not qualify.

2. Values
You must trade equal or greater in value of equity, debt, and fair market value.

3. Timing
Two basic forms of tax-deferred exchanges exist: simultaneous exchange and delayed exchange. Many variations exist, but all are catagorized under one of the two.

Simultaneous Exchange - An exchange in which both properties close on the same day.

Delayed Exchange - An exchange that takes place within 180 days of the initial sale and following acquistion.