IRS 1031 Exchange - IRS 1031

This is not a loophole, the IRS encourages the 1031 exchange.

The Internal Revenue Code 1031 allows real estate investors to defer paying their capital gains and depreciation recapture taxes upon the sale of their original investment property sale. The IRS 1031 loophole allows you to maximize a real estate portfolios ability to continually flip properties without the sting and burden of excessive capital gains taxes. An IRS 1031 Exchange property is the subsequent property purchased within 180 days of closing the old investment property. Because the Internal Revenue Code 1031 Exchange is a section of the U.S. Tax Code investors need to consult the expert advice of a Qualified Intermediary who conducts a significant volume of IRS 1031 transactions every year. The U.S. Tax code is dense and every changing, the courts frequently rule on new stipulations so you need the up to date advice of a trusted professional to avoid having to pay exorbitant fines and penalties in addition to capital gains taxes if you don't strictly comply to the parameters for a legal IRS 1031 Exchange. So what exactly are some of the parameters you should know before entertaining exchanging the proceeds of your old investment property into an IRS 1031 Exchange?

• Qualified Intermediary: An independent person who cannot be your lawyer, accountant, employee or broker must handle the legal paperwork and for the transaction. The funds go from the proceeds of the sale go directly to the Qualified Intermediary who has complete access to it. They then transfer the funds directly to the closing agent at the closing of the new 1031 exchange property.



• Time Limitations: The IRS 1031 code mandates that an investor has 45 days from the close of the old investment property to identify three potential 1031 exchange properties. The IRS 1031 exchange must close within 180 days after the close of the old investment property from one of the properties from the 45-day list.



• 100% Reinvestment: In order to legally defer your taxes through the Internal Revenue Code 1031 you must reinvest 100% of the proceeds of the sale for investment in the new exchange property.

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