In most transactions for the sale of real property, capital gains taxes are levied on any realized gain as a result of the sale. One way to defer the payment of capital gains taxes is to enter into a Section 1031 Exchange instead of completing a conventional sale of the property. In order to qualify for 1031 Exchange consideration, the property exchanged must meet very strict guidelines, including the requirement that the property exchanged be “like-kind”. While the exchange of some types of real property clearly meet the Internal Revenue Service guidelines, determining whether other types of property interests qualify can be more complicated. For example, certain oil, gas and mineral interests are potentially eligible for Section 1031 Exchange treatment, while others are not eligible.
Andy Gustafson
1031 Exchange Explained
A 1031 exchange can be explained in three ways. It is when a real or personal property held as an investment or for use in a business is sold and replaced with like-kind real or personal property held as an investment or for use in a business. It is an interest free loan or tax deferral. It is a section of the Internal Revenue Code Section 1.1031.
Reverse 1031 Exchange Planning
In preparation for an extensive reverse exchange, Josh Rothstein spoke for hours with Atlas 1031’s Andy Gustafson. Josh’s father also participated in the calls to discuss the steps of a multi property reverse exchange. Josh’s grandmother was selling an interest in a commercial property located in Los Angeles County, California. The replacement properties are single family homes needing repair and refurbishment in Texas.
1031 Exchange: Vacation Property Rental
Jeff Boll is General Counsel for SETCO Services, LLC in Perdido Key, Florida. He has worked with Atlas 1031 Exchange and Andy Gustafson for a couple of years referring clients interested in 1031 tax deferred exchanges. When it came to his personal 1031 exchange, he followed his guidance to others and engaged Andy at Atlas 1031 Exchange.
1031 Exchange: Land for Rental Property
Chris Kim was referred to Atlas 1031 Exchange by his Realtor to accommodate the 1031 exchange of vacant land for a rental property in different cities in Texas. The old or relinquished property was sold and the exchange proceeds were wired to an escrow account established under his tax identification number in Leesport, Pennsylvania with VIST Bank. Chris identified a couple of properties as potential replacement property by the 45th calender day post closing. After negotiating the purchase contract for rental property, the closing was held and the exchange proceeds were wired the day before the closing.
1031 Exchange Identification Rules
Pursuant to Section 1031(a)(3) of the Internal Revenue Code, replacement property received in a 1031 exchange is not considered like-kind to the relinquished property if the replacement property is not identified within the replacement property identification period of forty-five days post closing on the relinquished or old property. 1031 exchange identification rules are polar, implying there can be no post dating of the identification. Both the 45th and 180th day milestones can be extended given written authorization from the Internal Revenue Service due to Presidentially declared disasters such as hurricanes, tornadoes, floods and fire or military service in a combat zone.