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1031 Exchange ABC's


Do you own your own business or investment property? By exchanging properties as opposed to outright selling/buying them, you can keep more of your money working for you.

Section 1031 of the Internal Revenue Code allows investors to defer their capital gains tax from the sale of a business/investment property by purchasing like-kind real estate of equal or greater value. By executing a 1031 exchange, all proceeds from the sale of the original property can be used towards the purchase of a like-kind replacement property.

1031 Exchanges have three basic steps

All 1031 exchanges have the same three basic steps:

Basic Guidelines

  • Seller specifies in the contract that the sale of the property may be in the form of a 1031 exchange
  • Seller does not control the net proceeds from sale of the property; they must be deposited in a qualified escrow
  • Replacement property must be like-kind to the property that was originally sold
  • Replacement property must have equal or greater value that the original property that was sold
  • Replacement property must be identified within 45 days of sale
  • Replacement property must be acquired within 180 days