1031 Tax Exchange Basics

A 1031 tax exchange is a means to save equity in an investment property without the liabilty of capital gains. The following steps are the basics of the system.

1. A seller lists his/her property for sale

2. Upon close of escrow and monies gained are placed in a 3rd party holding account. There is a flat fee for this service and interest made during the holding period goes to the holding company.

3. The seller has 45 days after the close of escrow to identify 3 properties in which he/she has an interest in purchasing. These must be of equal or greater value as the sold property, and must be investment type property, not a primary residence.

4. The seller has 180 days after the close of the original escrow to close escrow on a new investment property.

The key numbers to remember are 45 and 180. Missing one of these dates will require the payment of capital gains. The seller can identify properties at anytime during the sale of the original property, however , the original property must close escrow prior to closing escrow on a new investment type property.

These are the basics. For more information please contact me at your convenience.