An Asset Exchange Company

Any property held for productive use in a trade or business or for investment can be exchange of for like-kind property. “Like-kind” refers to the nature of the investment. Any type of real property can be exchanged for another type of real property. For example: A single family rental can be exchanged for a 3 family rental. And industrial building can be exchanged for a shopping center or a multi-family dwelling. Any combination will work. Investors use this as a tool that allows capital gain taxes to be deferred  under IRC 1031. Properties must be located in the United States to qualify for a 1031 exchange If used correctly, there is no limit on how frequently you can do 1031 exchanges.

The like-kind replacement property is identified in a written contract signed by the exchanging party and received by the Qualified Intermediary before the end of the 45-day identification period.  The Exchanger may identify three properties of any value, one or more of which must be acquired within the 180 Day Exchange Period.

Yes. Using a 1031 for exchanging real property from one state to another is acceptable under IRC 1031. 1031 AES can help connect you with our partners in states throughout the country to find like-kind investment properties. It is important to recognize that the tax treatment of interstate exchanges vary with each state and it is important to review the tax policy with a tax professional for the states in question as part of the decision-making process.

It does not matter how many properties you are exchanging in or out of (1 property into 5, or 3 properties into 2) as long as you go across or up in value, equity and mortgage. The only concern with exchanging into more than three properties is working within the 45-day identification period and 180-day acquisition period set forth in IRC 1031.

Three rules exist for the correct identification of replacement properties.

1. The Three Property Rule dictates that the Exchanger may identify three properties of any value, one or more of which must be acquired within the 180 Day Exchange Period.
2. The Two Hundred Percent Rule dictates that if four or more properties are identified, the aggregate market value of all properties may not exceed 200% of the value of the Relinquished Property.
3. The Ninety-five Percent Exception dictates that in the event the other rules do not apply, if the replacement properties acquired represent at least 95% of the aggregate value of properties identified, the exchange will still qualify.

Unfortunately no. Your home is your home, and a 1031 exchange is used to defer the capital gains taxes due on an investment property. Personal residences qualify for different tax benefits under IRS Code Section 121. Section 121 allows a taxpayer to exclude up to $250,000 ($500,000 for certain taxpayers who file a joint return) of the gain from the sale (or exchange) of property owned and used as a principal residence for at least two of the five years before the sale. 1031 AES does not offer any services or tax advice on personal residences. Please speak with a tax professional for further information.

Personal residence, developed lots, home flipping, partnership interests, property held outside of the United States  or property held for resale immediately after acquisition. Second homes may or may not qualify depending upon the use and how it’s reported for income tax purposes. We can refer you to one of our tax specialists to help determine whether or not a property qualifies for a 1031 exchange.

There is no set timeline under IRC 1031, but to avoid any issues you should at least own it for a minimum of 12-24 months.

If you transfer the relinquished property and do not replace it with another, the sale will create a taxable event and any capital gain will be subject to federal and state capital gains taxes. If this takes place then you just pay the capital gain taxes like your would have if you were to sell the property in the first place.

A Qualified Intermediary is necessary to create the exchange of properties required under IRC Section 1031. Qualified Intermediaries such as 1031 AES are appointed to carry out the exchange, hold he exchange funds and prepare the necessary documentation for tax deferral, but we are precluded from counseling you on the desirability or tax implications of an exchange.

The Federation of Exchange Accommodators (FEA) is the only national trade association organized to represent professionals who conduct like-kind exchanges under Internal Revenue Code §1031. Members include Qualified Intermediaries (QIs), their primary tax and legal counsel, and affiliated industries (TIC sponsors, banks, real estate brokers, title companies, settlement/escrow agents, etc.). 1031 AES is a proud member of the FEA.