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.

How long do you have to buy a property with a 1031 exchange?

From the time of closing on the relinquished property, the investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property. Identification requirements: The investor must identify the replacement property prior to midnight on the 45th day.

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.

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 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 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.

Can you use a 1031 exchange for a primary residence?

All right, so you’ve established that your property is no longer your primary residence, but a rental property. Now you can do a 1031 exchange and defer all of the capital gains from a sale of that residence property. If you are considering a 1031 exchange, contact us to discuss your questions, concerns, and needs.

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