1031 Tax Exchange

1031 Tax Exchange Properties include land, office, warehouse retail, multi residential, hotel, and residential properties that have been declared an investment property.  Renae Jennings Commercial Real Estate specializes in 1031 exchanges.  We have been buying, selling and leasing commercial real estate since 1984.   

Capital  Gain  T a x  Information

Under normal circumstances, when you sell a property you have to pay taxes on the gain. Gain is caused by taking depreciation deductions for tax purposes or by the property appreciating in value during its ownership.

A Section 1 0 3 1  t a x  deferred  e x c h a n g e, named for the Internal Revenue Code Section it refers to (also known as a Starker-Exchange, T a x  Free  E x c h a n g e, or Like  Kind  e x c h a n g e), allows an exception to the real estate capital gains-taxes. When you sell your business or investment real estate, replace it with a different business or investment property, and complete a 1 0 3 1  e x c h a n g e, you can defer payment of the capital gains taxes normally required on these sales. You can also avoid capital gains taxes on rental property capital gains taxes.

If your plans include using the money from the sale of a business or investment property to buy more of the same, a 1 0 3 1  real estate  e x c h a n g e provides greater proceeds for your next investment-more than you could gain through the re-investment of after taxed proceeds.

A 1 0 3 1  t a x  e x c h a n g e and the Capital  Gain  t a x rule is not a  t a x  loophole. It is a section of the Internal Revenue Code, written by Congress, to allow anyone who meets all the requirements to sell their property and defer paying taxes on the gain.

Understanding the Capital  Gains  T a x  Rule and
Avoiding the Capital  Gains  T a x

All relinquished (old) and replacement (new) property must be vacant land, rental property or property used for trade, business or investment. The property must be held for at least a year and a day to qualify for a 1 0 3 1  Exchange. If the properties meet these requirements, you may  e x c h a n g e  any real estate for any other type of real estate:

You cannot have actual or constructive control of any of the proceeds received from the sale of the old property. By law, all money is held by a Qualified Intermediary (also referred to as an Accommodator or Facilitator). You cannot have an associate or employee, your attorney, broker or CPA hold the proceeds, nor can you leave the proceeds in escrow until the second property is purchased.  

You have 45 days from the date of closing on the old property to identify a list of properties, from which you will purchase the new property.

From the date of closing, you have 180 days to close on one or more of the properties from your 45-day list.

The titleholder on the old property must be the same titleholder on the new property.

You must reinvest all cash proceeds from the sale, and purchase a new property or properties of equal or greater value, in order to avoid taxation on the gains.