About 1031 Exchanges

The Internal Revenue Code Section 1031 allows investors a fantastic opportunity to defer payment of capital gains taxes and depreciation recapture taxes, by following a detailed set of regulations. An experienced real estate broker can provide guidance through the entire IRC Section 1031 process, starting with the marketing and sale of property you own and the next step of searching and negotiting the purchase of the replacement property, thus completing a valid 1031 tax deferred exchange.

A great broker will refer you to the services of an Internal Revenue Code Section 1031 Qualified Intermediary (called the “QI”). The QI handles the paper trail for compliance with Internal Revenue Code Section 1031. The QI will also temporarily hold your sale proceeds until you request the QI disburse funds for the purchase of your replacement property. Bringing the QI into the paper trail process must occur before you close escrow on a sale property and having a QI is not optional if you wish to ccomply with Internal Revenue Code regulations. Don't risk having an “invalid exchange” and potentially facing huge tax penalties years down the line.

(Note: Investors should seek counsel from a CPA or Tax Attorney prior to entering a proposed IRC Section 1031 transaction.)