What is a 1031 Exchange?

When property is sold, the seller pays tax on any gain or deducts a loss.   Section 1031 of the tax code gives taxpayers an opportunity to defer any gain on the sale of qualified property.

Most exchanges are completed through an intermediary (such as 1031 Exchange Corporation).  The IRS has published rules (safe harbor rules)  for an intermediary assisted exchange. If these rules are followed, the IRS will not challenge the exchange. This safe harbor is a primary reason for using

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Should You Exchange?

Does An Exchange Make Sense?
Should I exchange is a common question. Sometimes the answer is clear and other times it is not. We will examine some of the issues or decision points which can help you decide.

Do you intend to re-invest in like-kind property?
If the answer is yes, the exchange decision is easy. An exchange makes sense if the cost of the exchange is less than the tax saved.If you do not intend to re-invest in like-kind

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Planning an Exchange

Planning can maximize benefits
Very little forethought is required to set up an exchange. You can even call a few hours before closing and we can usually prepare the documents required to establish an exchange. However, a little planning can help  maximize the tax and economic benefits from an exchange.

Planning should start with an analysis of the property (relinquished property) you intend to sell or exchange. What is the likely sales price of the property? What is your tax basis?

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“Washington state law, RCW 19.310.040,

requires an exchange facilitator to either maintain a fidelity bond in
an amount of not less than one million dollars that protects clients
against losses caused by criminal acts of the exchange facilitator, or
to hold all client funds in a qualified escrow account or qualified
trust that requires your consent for withdrawals. All exchange funds
must be deposited in a separately identified account using your
taxpayer identification number. You must receive written notification
of how your exchange funds have been deposited. Your exchange
facilitator is required to provide you with written directions of how
to independently verify the deposit of the exchange funds. Exchange
facilitation services are not regulated by any agency of the state of
Washington or of the United States government. It is your
responsibility to determine that your exchange funds will be held in a
safe manner.”

1031 Exchange Corporation

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Austin, Texas 78731
Office: 512-419-1031
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