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1031 Exchanges & Tax Deferred Savings
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Tax Deferred Exchange is an extremely powerful investment technique which
allows your tax dollars to remain invested in property rather than being
paid out as income tax. 1031 exchanges allow a buyer to leverage the deferred
tax savings into alternative real estate properties that can produce additional
cash outflows and create wealth.
Section 1031 of the Internal Revenue Code
states “No gain or loss shall be recognized if property held for
productive use in a trade or business or investment purposes is exchanged
solely for property of a like-kind.”
1031 Exchange & Single/Multiple Properties
Single or multiple properties may be exchanged
in the 1031 Exchange transaction. The first step of the exchange occurs when the relinquished
property sells and the proceeds are held by a “Qualified Intermediary”
such as Bankers Escrow Corporation. The second step involves identification
of replacement property and the held proceeds are released at closing.
An Exchange Agreement and Assignments are utilized for all properties
in an exchange.
Specific requirements defined in Section
1031 include a 45 day identification period, a 180 day period in which
to close on a replacement property and the use of a “Qualified Intermediary”
as the taxpayer cannot receive any proceeds from the sale of the relinquished
property either actually or constructively.
How 1031 Exchanges Work
Understanding how the 1031 exchange process will
affect your real estate transaction is very important. Bankers Escrow
Corporation provides assistance in identifying potential problems and
areas of concern for agents or investors whom lack experience in exchanging.
Bankers Escrow Corporation’s experienced
staff of CPA’s and escrow officers will process exchange documents
within the same day with the goal of making your exchange easy, convenient
and inexpensive. Email us
at request@bankersescrow.com
or call 303.986.4848 or 1.800.571.6595 for a
quote or to brainstorm your contemplated exchange.
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