When people in Real Estate talk about a 1031 Exchange, most people have little to no idea what that implies. And that’s totally understandable, and it is not uncommon to be confused! Even people who work in the Real Estate industry have no idea what a 1031 Exchange is exactly.
A 1031 Tax Deferred Exchange occurs when the sale of one property is “exchanged” for another property of equal value, or “Like-kind”, without having to pay any upfront federal income taxes on the transaction. It is intended for investment properties, and at one time it was almost exclusively for commercial transactions. But with the way the economy is, more and more investor homeowners are finding the convenience and draw of a 1031 Exchange and avoiding the capital gains tax penalties as a result of property sales gain. Of course, to use a 1031 Exchange, there are certain rules and exceptions and requires advanced planning. But there are three main rules to keep in mind:
1) A replacement property must be of Equal or greater value to the property being sold. “Like-kind”
2) The replacement property must be identified within 45 days and the property must be purchased within 180 days
3) Find and use a Qualified Intermediary
Now, 1031 Exchanges can be a little tricky but with Metro Title’s 1031 Exchange program acting as the Qualified Intermediary (QI), it will be a piece of cake! We prepare all the documents required, execute your closings, hold your exchange proceeds, and coordinate with everyone from your tax and legal advisors to your real estate agents. With each transaction, you’ll get the same professional attention to detail and expertise, regardless of size or complexity. By working with Metro Title’s 1031 Exchange program, you can confidently take advantage of this powerful tax-deferral strategy.
