Quick Answer: What Are The Rules Of A 1031 Exchange??

A 1031 exchange gets its name from Section 1031 of the U.S.

Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.

Does California recognize 1031 exchanges?

Investors will merely have to continually file an information return with the State of California each year. Investors will never have to pay the California taxes due under the California Claw-Back Provisions as long as they continue to 1031 Exchange from property to property throughout their lifetime.

How long do you have to hold a property in a 1031 exchange?

Again, there is not a tax code mandate of one year, but it may be that the IRS would like to see at least a one-year hold. The only minimum required hold period in section 1031 is a “related party” exchange where the required hold is a minimum of two years.

How do I do a 1031 exchange?

The 10-Step Process to Perform a 1031 Exchange

  • Decide to sell and do a 1031 exchange.
  • List your property for sale.
  • Begin looking for replacement properties.
  • Find a qualified intermediary.
  • Negotiate and accept an offer.
  • Close on the sale of your relinquished property.
  • Identify up to three properties within 45 days.
  • Sign a contract on the first-choice property.

How much does it cost to do a 1031 exchange?

Institutional Qualified Intermediaries typically charge a set-up or administrative fee in the range of $850.00 to $1,200.00 for each 1031 Exchange transaction. This fee usually includes one sale property (“relinquished property”) and one purchase property (“replacement property”).

What is the time limit for a 1031 exchange?

180 days

Can I move into my 1031 exchange property?

It can be done, but the key is your intention at the time you acquired the replacement property. If so, you may be able to re-characterize that 1031 exchange-deferred gain on investment property into gain on your principal residence and enjoy some or all of the $250,000 or $500,000 exclusion on its sale.

Can a trust do a 1031 exchange?

Given this condition, trusts can take part in section 1031 exchanges as long as the same entity that disposed of the relinquished property also obtains the replacement property. The grantor will not have to file a separate tax return for the trust, so the same basic taxpayer requirement is met.

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