1031/1033 Exchange

A 1031/1033 exchange is a highly technical financial transaction. We are here to oversee your exchanges and ensure that they are successfully completed. A 1031 exchange is one of the few techniques available to postpone or potentially eliminate taxes due on the sale of qualifying properties. By deferring the tax, you have more money available to invest in another property. In effect, you receive an interest free loan from the federal government, in the amount you would have paid in taxes. Any gain from depreciation recapture is postponed and you can acquire and dispose of properties to reallocate your investment portfolio without paying tax on any gain.

There are a few different types of exchanges including simultaneous, delayed, build-to-suit, reverse, condemnation, and personal property. A valid exchange requires a qualifying property, the proper purpose, land a like-kind property. Certain types of property are specifically excluded from Section 1031 treatment. In general, if property is not specifically excluded it can qualify for tax-deferred treatment. Replacement property acquired in an exchange must be “like-kind” to the property being relinquished.  All qualifying real property located in the United States is like-kind. Personal property that is relinquished must be either like-kind or like-class to the personal property which is acquired. Property located outside the United States is not like-kind to property located in the United States.

The relinquished property must be exchanged for other property, rather than sold for cash and using the proceeds to buy the replacement property.  Most deferred exchanges are facilitated by Qualified Intermediaries, who assist the taxpayer in meeting the requirements of Section 1031.