Executing a 1031 Exchange
August 22, 2016
Internal Revenue Code Section 1031, or as it is more commonly known, the 1031 Exchange, allows the exchanger to defer all immediate taxable liability indefinitely, as they sell one investment property for another within a defined period of time and by meeting certain federally regulated guidelines.
How It Works:
As amended in 1986, this section of the code outlines certain requirements that must be met to continue an investor’s ability to defer their taxable liability. The fundamental requirements to execute a fully compliant exchange include, but are not limited, to:
- Retaining a Qualified Intermediary
- Meeting federally mandated timelines and deadlines (identifying and closing property)
- Making sure replacement property is like-kind to the relinquished property
- Ensuring the value of the replacement property is at least equal or greater than the property disposed.
Using these four fundamental guidelines, the exchanging should have no problem executing a successful exchange, and defer the immediate taxable liabilities.