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Real Property Exchanges Under Section 1031
Background of Real Estate Exchanges: Introduction
Internal Revenue Code Section 1031 provides that capital gains taxes are deferred when business or investment real estate is exchanged, rather than sold. Under Section 1031, the exchange may be simultaneous or delayed. In a delayed exchange, the property the taxpayer ("Exchangor") desires to exchange is conveyed before the replacement property is acquired. To achieve favorable tax treatment, the structure of a delayed exchange must comply with the requirements of Section 1031, including the identification and acquisition of the replacement property within strict time deadlines, as discussed at Detailed Exchange Information.
A sale of business or investment real estate followed by reinvestment in real estate does not qualify as an exchange under Section 1031, and exchange transactions must be structured carefully to prevent characterization as a taxable sale and purchase. Regulations issued by the IRS provide detailed requirements for delayed and simultaneous exchanges under Section 1031.
For further information, please read the general information at Detailed Exchange Information.
THE INFORMATION HEREIN IS NOT TO BE CONSTRUED TAX OR LEGAL ADVICE. IF TAX OR LEGAL ADVICE IS NEEDED, AN ATTORNEY, ACCOUNTANT OR OTHER QUALIFIED COUNSEL SHOULD BE CONSULTED.
