Whenever you sell an investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. Section 1031 of the IRS Tax Code provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds into a new investment property as part of a qualifying like-kind exchange. Keep in mind, the deferred gain in a 1031 is tax-deferred, but it is not tax-free.

Owners of investment and business property may qualify for a 1031. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

  • The transaction must involve an exchange and not a sale of real properties. This means a seller (exchangor) cannot receive or control the proceeds of the sale.
  • All proceeds applied to replacement property.
  • Exchangor must designate replacement property within 45 days from the closing (conveyance) of the original investment property.
  • All replacements must be completed within 180 days from the closing (conveyance) of the original investment property.
  • Capital gain taxes are deferred.
  • Upgrade your investment to a better property.
  • Diversify and exchange into multiple properties.
  • We have successfully completed many exchanges, helping our clients defer hundreds of thousands of dollars in taxes.
  • We work with the best in the business and can refer you to our network of CPAs, attorneys, escrow companies and exchange facilitators.
  • We work efficiently and expeditiously to make sure deadlines are met.

Report on Form 8824 and file it on your tax return for the year in which the exchange occurred.

Always consult with your licensed tax professional or tax attorney. Be wary of experts who promote or guarantee tax savings or improper exchanges for nonqualifying properties such as second homes.


Decide to do a 1031 Exchange

Are you ready to diversify or upgrade your investment property? Do you need to sell, but want to defer your capital gains tax? 1031-Exchange might be the right option for you.


Sell your investment property

Exchanger & Buyer enter into a contract for the sale of the original investment property. An escrow is established as in a typical transaction. An Exchange Agreement is drawn up which assigns the contract to the accommodator, and upon buyer meeting all conditions in escrow, the title of the original investment property is conveyed to the accommodator. 

Simultaneous with the acquisition of the original investment property by the accommodator, title is conveyed to the buyer. 


Identify replacement property within 45 days

Buyer's funds (net proceeds) are then transferred to accommodator from escrow for the purchase of a suitable replacement property. 

A replacement property is designated within 45 calendar days, and a contract is entered into and assigned to accommodator. The exchange proceeds from the sale of the original property is then paid to the replacement property owner by escrow. 


Close on property

The replacement property is then conveyed to accommodator.

Simultaneously with the acquisition of the replacement property by accommodator, title is conveyed to exchanger, which completes the exchange. 


Defer capital gain taxes

As capital gain taxes would be deferred, all of your proceeds could be applied towards the acquisition of the replacement property. This would greatly increase your buying power and give you maximum utilization of your investment funds. 

Since and exchange can involve multiple properties, it would provide a greater diversity in your investments. 

By doing an exchange, taxes would be deferred to take advantage of a future occurrence such as falling in a lower tax bracket. 

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