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Frequently Asked Questions
What is a 1031 exchange?
A 1031 exchange is a swap of one investment property for another that defers capital gains taxes, requiring the properties to be of “like-kind” and the exchange to be completed within 180 days.
What does “like-kind” mean?
It means real estate. You would trade one property for another property. Please keep in mind mobile homes & tiny homes are personal property, but the land they sit on is real property.
What are the rules of a 1031 exchange?
You must exchange investment or business use property for the same type of property, use a qualified intermediary, identify a new property within 45 days & purchase it within 180 days.
What does it cost?
It’s free to use & 3% if you buy. There’s no obligation to purchase, but if we do find a deal that you buy we’d like to be compensated for doing so.
Why use 1031search?
Because we’ll try to find you a deal before your deadline is up to save your taxes and you’ll get to look free of charge. We believe friends don’t let friends pay taxes.
What kinds of properties will you find?
Impossible to know. You can complete our discovery package to help us identify the right thing for you. We likely can’t meet all of your wants. Our goal is to meet your needs.
Will I like the property you send me?
Maybe, our main goal is to get you off the clock, save taxes, find you something safe that hits reasonable return targets. That’s hard to do especially if you have greater expectations.
Why would I buy something I don’t love?
Because we’re going to find you something that checks your boxes. Once you complete your exchange we’re going to have a year to find you that perfect property, but you won’t have paid taxes.
Why choose 1031search?
We have strategies & connections others don’t, like providing cheap interest rate debt, below market pricing, cashback methods or temporarily parking your 1031 to find a permanent replacement.
What are the benefits of an exchange?
The main benefit is tax defferal. When you sell a property for a gain if you 1031 exchange you aren’t taxed so long as you follow the rules of IRS Code Section 1031.
What are the benefits of an exchange?
The main benefit is tax defferal. When you sell a property for a gain if you 1031 exchange you aren’t taxed so long as you follow the rules of IRS Code Section 1031.
Do I have to do any reporting?
An exchange must be reported to the IRS on Form 8824, detailing the properties exchanged, the timelines, and the financial aspects.
Who is eligible for an exchange?
Individuals, Corporations, Partnerships, LLCs, Trusts, Estates can be eligible fore a 1031 exchange as long as teh properties involved are held for investment purposes.
Is there a holding period for a 1031?
There is no set period, but the IRS looks for signs of intent to hold for investment. A minimum of one to two years of holding before an exchange is often recommended to clear this hurdle.
What happens if you touch the money?
Your exchange is disqualified if you receive sale proceeds, that’s why it’s important to get a qualified intermediary.
What happens if you touch the money?
Your exchange is disqualified if you receive sale proceeds, that’s why it’s important to get a qualified intermediary.
Can I exchange into a vacation home?
Yes, but the it must be rented out for at least 14 days a year & you can only use it 14 days per year or 10% of the number of days during the year that the home is rented at a fair rental rate.
Can I do a partial exchange?
Yes, you can exchange a portion of your property and take some cash out; however, the cash received (boot) will be taxable.
Can I do a partial exchange?
Yes, you can exchange a portion of your property and take some cash out; however, the cash received (boot) will be taxable.
What is boot?
Is the portion of the sale that is not property. Boot can be cash, debt relief (when the new mortgage is less than the old one) or personal property.
Can I exchange foreign property?
You can exchange a U.S. property for a U.S. property, or a foreign property for a foreign property, but you can’t mix them.
What types of exchanges are there?
Delayed (also called forward), simultaneous, reverse, improvement/construction, foreign & zero equity exchange.
What should I do before exchanging?
Review what your depreciation recapture & capital gain taxes will be with your tax & legal advisors. Check with your advisors before doing anything!