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Multi Storey Building
  • Why 1031 Exchange?
    Deferring Capital Gains is primary the reason for a 1031 Exchange. This allows an investor to swap for better returns. To Diversify or Consolidate their portfolio. Shift from Active to Passive Roles. Along with Life Planning and many other reasons.
  • How Much Time Does It Take To Set Up A 1031 Exchange?
    Of course, it's always best to plan your 1031 Exchange in advance, and to make sure it is the right option for you. However, we generally request a minimum of 5 days prior to get your 1031 documents ready and to coordinate closing with your title company. However, we can provide next day and even same day document creation upon request. A great articla by Phil Tomlinson on proposed tax reform and the implications on the 1031 Exchange. This reform would significantly impact the commercial real estate market. It could result in fewer jobs, lower real estate values, and ultimately lower tax revenues.
  • What Happens If I Dont Complete My Exchange In 180 Days?
    The short answer is that after 180 days, the exchange is no longer valid. The proceeds are returned to you and the transaction is treated as a sale. You will pay the capital gains tax, recaptured depreciation, etc., like any other sale.
  • Do I have to reinvest all of my equity into the new property?
    Yes, to be a fully deferred, all net equity must be reinvested into a property of equal or greater value. However- there is no reason you cannot refinance or get cash out of the new property after close.
  • What property is eligible for 1031 Exchange?
    Most properties that are held for investment or business purposes qualify for a 1031 Exchange. This includes Land, Leaseholds of 30 plus years, and Mineral Rights. Vacation Homes can qualify if they meet IRS requirements.
  • What are the IRS requirements for vacation homes?
    The property must be rented out at least 2 weeks each year, and personal use must be limited to 2 weeks per year. No guidelines on time frame, but 2 years is the considered safe
  • Do I only have to reinvest my Captital Gains?
    I hear this question a lot, of course the answer is no. It is a 1031 "Exchange", you are essentially trading one property for another. All the equity, debt and depreciation are transferred into the new property.
  • Can I utilize a 1031 exchange on a second home?
    Yes, you absolutely can. However, you must meet the IRS Guidelines to qualify. There are two main requirements, or limitations, to doing a 1031 Exchange on a Second home. The first, is that personal use must be limited to two weeks per year. The second requirement is that the property must be rented out for at least two weeks each year, at what is considered a normal market rate. Two years of rental history is normally considered adequate to qualify for a 1031 Exchange. The same guidelines can also be used if you plan to convert your current residence to a rental home and then use it in a 1031 Exchange. As always, consult your tax advisor with any real estate or business transactions.
  • What If I Start The Exchange This Year But I Cannot Complete The Exchange Next Year?
    The Taxes are due from the sale in the year the gains are received, Effectively, you would have postponed the taxes due into the next fiscal year. Obviously this can be a possible benefit for some if they are not able to complete the exchange. As with all financial decisions, you should consult you professional advisors to see what is best for your situation.
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