A 1031 exchange, also known as a tax-deferred exchange, allows you to exchange investment property and defer the "capital gains", which is the difference between the purchase price and selling price, when the selling price is greater, and "depreciation recapture taxes", which is the element of capital gain attributable to depreciation deductions taken on your property in prior years.

This requires reinvestment of 100% of the equity into "like-kind" property of equal or greater value. Any property held for investment purposes or for productive use in a trade or business generally qualifies as "like kind" property for 1031 exchange purposes.

The 1031 exchange rules require an investor to identify up to three potential "replacement" investment properties within 45 days of the close of escrow on their relinquished property. The acquisition of the replacement investment property (or properties) must be successfully completed within 180 days of close of the relinquished property.

Benefits of a 1031 Exchange

A 1031 exchange is intended to foster investment sales and purchases by allowing you to defer capital gains and depreciation recapture taxes. It also lets you to access the equity in your investment properties at predictable time intervals in order to maximize the inherent benefits of your real estate investments, while avoiding a tax bill until such time as you are in a better position to pay it.

The tax dollars saved (“deferredâ€�) can be reinvested.  Reinvesting the deferred money is a good way to take advantage of the compounding effects of leveraging the equity in your investment property.  Doing so over several holding periods can potentially produce higher actual dollar returns, new depreciation schedules to tax shelter cash flow, and accelerate equity accumulation.  Deferred tax exchanges also lets you trade low performing properties for properties with better net operating incomes, which increases your cash flow, without presently paying taxes on any gains.

Choose Barrister Title Company to handle your 1031 Exchange. What ever your needs are we can help, contact us today at (850) 434-3310.