You may have heard of a 1031 Exchange and wondered if this is something that would be beneficial to you. A 1031 Exchange refers to the Internal Revenue Service code section 1031. We will explain what a 1031 Exchange is and how KALEO Real Estate Company can help with your 1031 Exchange if you choose to conduct one.
A 1031 Exchange is also known as a Like-Kind Exchange.
Defined: 1031 Exchanges
What is a 1031 Exchange? 1031 refers to section 1031 of the Internal Revenue Code.
As explained by 1031 Exchange Resources Inc.:
“The purpose of 1031 Exchanges is to allow investor-owners to move laterally or upward as they manage their investment property portfolios, deferring capital gains taxes on the sale and recapture of depreciation so they may put that money instead toward greater investments.
The IRS allows this only with exacting documentation on both the sale and replacement properties within scrupulously regulated timeframes. An investor-owner must retain a Qualified Intermediary to generate the documentation pursuant to IRS requirements, as well as to hold and transfer exchange funds, during the 1031 timeframe.”
KALEO Real Estate Company is not a Qualified Intermediary, but we have represented sellers who are conducting a 1031 exchange and worked with Exchange Accommodators.
The Players in a 1031 Exchange
A Qualified Intermediary also known as Exchange Accommodator is the key part of a 1031 Exchange. The Qualified Intermediary is a third party who facilitates the 1031 Exchange. You cannot ask anyone to be your Qualified Intermediary.
Your Real Estate Agent also must include specific language in your purchase contracts disclosing that the seller or buyer that it is a 1031 Exchange. 1031 Exchanges involve strict timelines and proper disclosure is important.
This material is provided for informational purposes only. Please consult the appropriate legal, tax, accounting, estate planning, or other professional for advice. KALEO Real Estate Company does not intend to advise on tax, legal, accounting, or other decisions.