1031 exchange basics for real estate investors
How a 1031 exchange lets investors defer capital gains tax when selling and reinvesting in like-kind property, and the timeline rules that matter.
What a 1031 exchange is
Section 1031 of the IRS code allows an investor to defer capital gains tax on the sale of an investment property if proceeds are reinvested in a like-kind property within set deadlines.
Timeline rules
45 days to identify replacement property, 180 days total to close. Both clocks start at the sale of the original property. Missing either deadline disqualifies the exchange.
Qualified intermediary
A 1031 requires a qualified intermediary to hold the proceeds between sale and purchase. The seller cannot touch the funds at any point, which is a hard rule.
Like-kind, broadly defined
For real estate, like-kind is broad: investment property exchanged for other investment property. Residential rental for commercial, vacant land for an apartment building, and so on.
When a 1031 makes sense
When the deferred tax outweighs the cost of the exchange and the constraint of the timeline. MUVE works with qualified intermediaries and CPAs to evaluate fit for each situation.
Thinking through an investment sale and possible 1031? MUVE will walk through the specifics with you and connect you to a qualified intermediary and CPA when ready.
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