1031 Exchange - 1031 Like Kind Exchange

Real Estate Investments

(1031 Exchange)

1031 Exchange - 1-877-812-1031

A 1031 Exchange is also known as a Like Kind Exchange or a Starker Tax Deferred Exchange, named for an investor who challenged and won a case against the IRS, for a transaction under the United States law which specifies under section 1031 of the Internal Revenue Code, 26 U.S.C the following:

“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."

A 1031 exchange is a way for the owners of business and investment Real Estate to sell their property and buy another like kind property without paying Capital Gains Tax and allow investors to continue his/her investment in another property without loosing investment equity to taxes.

This allows taxpayers to defer all the capital gain taxes resulting from the sale of investment property when they use a Qualified Intermediary which follows all the IRS guidelines, and by using the proceeds of the sale to buy more investment property within 180 days of their sale. In order to get or obtain the full benefit, there must be equal or greater value, with equal or greater debt of the replacement property unless the taxpayers add cash to the deal to replace debt instead, and all of the proceeds from the relinquished property must be used to acquire the replacement property. The taxpayer must have assigned his interest in the relinquished property to a Qualified Intermediary prior to the close of the sale, so that the taxpayer has lost control of the funds before he has any opportunity to obtain them.

At the close of the relinquished property sale, the proceeds are sent by the closing agent to the Qualified Intermediary, who holds the funds until such time as the transaction pertaining to the replacement property is ready to close. Then the proceeds from the sale of the relinquished property are deposited by the Qualified Intermediary to purchase the replacement property, which is then delivered to the taxpayer, all without the taxpayer ever having "constructive receipt" of the funds.

The idea behind 1031 exchange is that since the taxpayer is exchanging from one property to another of like kind, there is nothing received by the taxpayer that can be used to pay taxes and all the gain is still locked up in real estate and so no gain or loss can be claimed.

For more information on performing a 1031 Exchange or for additional information on real estate investing, either on Long Island, or across the nation visit www.1031exchangemadesimple.com or call: 1-877-812-1031