What is a 1031 Tax Deferred Exchange?

It is the last remaining tax shelter for real estate investment. IRC 1031 is part of the Internal Revenue Code that allows, under certain conditions, the tax payer to defer paying the tax owed at the time of sale until some future date. The tax-deferred exchange is simply an exchange of the adjusted gain, or profit, for another property. The property owner must comply with certain criteria to qualify and then simply exchanges one property for another. If the rules of the IRC 1031 are followed carefully, the property owner can move up in value, security and cash flow, inexpensively while he maintains all his equity in the new target property.

Do I have to find a target property first?

Simultaneous exchanges are allowed by the IRC 1031, but rarely occur. More typically, the property owner will find a buyer for his property and include language in the purchase and sale agreement that allows a 1031 exchange. Then the property owner targets a replacement property or properties in the next leg of the exchange. The properties do not have to close at the same time, however, the rules state that the property owner must choose a property or properties and close on them within 180 days.

I have over twenty years of 1031 Tax Deferred experience, representing both relinquished and/or target properties.  Call me if I can assist you in your next exchange.