What is a 1031 exchange?

If you hear people talking about doing a 1031, they are referring to Section 1031 of the IRS code that allows real estate investors to sell an investment property and to buy another one with out paying capital gains taxes. To do a 1031, you do have to follow certain rules as prescribed by the irs tax code. The new properties that are going to be purchased must be Like Kind and must be identified within 45 days of closing of the initial property. All of the proceeds from the initial sale must be used to buy the new investment property and must be turned over to an intermediary or a Qualified Intermediary. The funds will be held in escrow until they are need to complete the next purchase. For the rules of doing a 1031 exchange, contact a title company. Most title companies have departments that specialize in handling 1031 exchanges. They can answer all of your questions.

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