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IRC § 1031
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. – SECTION 1031 OF THE INTERNAL REVENUE CODE.
Basic Requirements of a §1031 Like Kind Exchange
A “tax-deferred exchange” is at least a two step transaction involving (1) the
disposition of qualified exchange property and (2) the acquisition of “like-kind”
replacement property as described by Section 1031 of the Internal Revenue Code,
thus qualifying for nonrecognition of gain or loss.
- Strict, Precise Time requirements are mandated to successfully complete a 1031
exchange transaction. All time limits start from the date the “relinquished”
property closes. The exchanger has a 45 day period identification period to
find and ID preferred potential “replacement” property. The client then has
180 days from date of close on “relinquished” property to close on the identified
“replacement” property.
- The exchanger must NEVER be in constructive receipt of any proceeds from the
sale of the relinquished property.
- It is recommended that all person(s) interested in participating in a 1031 Like-Kind
exchange transaction to seek the guidance and advice of a legal or tax advisor.
- To ensure the validity and success of your 1031 Like Kind exchange transaction,
it is recommended that all person(s) and their legal/tax advisor seek the help
of a Qualified Intermediary.
WHILE MANY PROPERTIES QUALIFY FOR §1031 EXCHANGE TREATMENT, SOME DO NOT. FOR
EXAMPLE:
- PRIMARY RESIDENCES
- STOCK IN TRADE OR INVENTORY
- SECOND OR VACATION HOMES
- CERTIFICATES OF TRUST OR BENEFICIAL INTERESTS
- PROPERTY HELD FOR RESALE
- STOCKS, BONDS, NOTES OR PARTNERSHIP INTERESTS
For more information on §1031 Like-Kind exchange transactions please click here.
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