Are you. . .
- Selling a piece of investment property?
- Purchasing another piece of investment property?
- Do you want to defer paying capital gain taxes – use 100% of your equity to purchase the new property?
If you answered “yes” to all of the questions above, then you’ll want to look into a 1031 Tax Deferred Exchange. A 1031 Exchange is an IRS rule that allows you to sell an investment piece of property and buy another one while deferring the capital gains and using 100% of your equity in your old property to purchase your new one.
There are very specific rules and time frames for qualifying under the 1031 rule. Within 45 after you’ve sold your current property, you need to identify possible replacement properties to the IRS and you must close on one (or more) of these as your replacement property within 180 days after the sale of your current property.
Also, in order to qualify for the exchange, neither you nor anyone working for you (your real estate agent, attorney or accountant) can touch the funds. You need to use a qualified intermediary to help you with the process.
For more information, check out Exchange Authority.