Tax Free Exchanges (Turn your speaker on and click on any of following questions)

Need Immediate Help - Call 877-800-1040 or email

Tax Deferred Exchange Home Page

1.  Can I exchange for property of less value?

2.  Do I have to exchange for the same type of property?

3.  Does the exchanges have to been done simultaneously?

4.  What is a QI?

5.  Will IRS audit a tax free exchange?

6.  Can I change the name on the title of the new property?

Preserve Equity, Build for the Future Using a 1031 Tax Exchange
Neda Dabestani-Ryba

Preserve Equity, Build for the Future Using a 1031 Tax Exchange
By Neda Dabestani-Ryba

Thinking of trading up on an investment resort property? If so, look into 1031 Tax Exchanges (based on IRS Code Section 1031), which allow taxpayers to defer taxes on capital gains resulting from the sale of investment real estate, often a sizable sum since combined Federal and State taxes can run as high as 38 percent.
With an exchange, owners are able to preserve equity, while still selling the property. The underlying concept is that an exchange of like-kind property for like-kind property does not generate funds, which can be taxed since the profits go directly into the new or replacement property. To accomplish this, sellers hire a Qualified 1031 Intermediary (QI) to document the sale as an exchange and to receive the funds from the sale. The QI then delivers the funds directly to the closing agent for the replacement property who deeds the property to the taxpayer.
Central to a 1031 Exchange is the interpretation of like-kind property. While the common assumption is that like-kind implies land for land or a condominium for a condominium swap, the interpretation of like kind is actually less literal. Rather, it defines like kind as meaning that both the replacement and the original property must be used as an investment. So land, condominiums, single-family homes and motels can all be exchanged for one another as long as they are used in the exchanger's business or held as an investment. The amount of debt held on the replacement property must be the same as the amount of debt on the original.
1031 Exchanges are complex mechanisms and like all IRS requirements very specific. For example, exchangers have 45 days from closing to identify properties they intend to purchase and 180 days to complete the purchase. Purchase and Sale agreements must include verbiage indicating the intent to affect a 1031 Exchange.
The 45-day time frame used to be onerous for sellers. Now, they can opt for a Reverse Exchange, in which an additional third party called "the exchange accommodation title holder" (EAT) acquires title to the replacement property until the original property sells. Reverse Exchanges shift the 45- and 180-day time frame to the selling side of the transaction. With an Improvement Exchange, which also uses an EAT to hold the replacement property, sellers can build investment properties from the ground up or improve existing properties. The improvements have to be built and paid for during the 180-day period.
If you are interested in a 1031 Exchange, the first step is to consult your tax advisors as well as an attorney or CPA who is knowledgeable with 1031 Exchanges. Make sure that your real estate professional knows you plan to conduct an exchange and be sure that he or she is familiar not only with the process but also with the specific documentation and time frame mandated by the IRS.
This article is intended to inform readers, but does not constitute any financial or legal advice.

Neda Dabestani-Ryba is a licensed Realtor in Maryland. She is a member of the President's Circle of Top Real Estate Professionals. She can be reached at (800) 536-3806 or visit her website for more information:
Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity

Latest Tax Free News
Tax Free Articles
Additional Resources
Want to Join the Moms?
Questions for CPA Moms?

Death & Taxes

We have Information to Help You with Either

Got Question for about a Tax Free Exchange?

IRS wants you to retire Financially Free!     We will answer your questions and give you options about how to become Financially Free when you retire

Tax answers/options when you sell your Home.      We will answer your questions about the tax free home sales and give you options on tax free exchanges

So, You got a letter from IRS?  We can help.    Letters from IRS are scary. We will answer your questions at no charge.

S-Corp, LLC, C-Corp, Partnership - Your Choice?    Selecting the correct Business Entity is confusing.  We will give you the tax options of each Business Entity.

How not to pay taxes when you sell income property.    We will explain how to do a tax free exchange & not pay taxes when you sell your income property.

Complete this form for Carl's Tax Tip on "How to get Tax Free Cash out a Tax Free Exchange"

E-mail Address: *
Your First Name *
Your City *
Your State *

* Required

More Information Less Taxes

Need Cash Quick?
   Same Day
   Next Day - 37,127 Locations
   Refund Anticipation Loan
   Earned Income Credit

Tax Deductions
     Day Care
     Medical & Dental
     Educator Expense
     Divorce & Alimony
     Donating Car to Charity

Personal Finance
   Retire Buying Tax Liens
   Borrowing from your 401k
   Your Credit Report
   Credit Repair
   Your Social Security
   Social Secuity Disability
   Indentity Thief
   Reverse Mortgages

Tax Preparation Specilities
 Truckers - Long Haul/Local

Where is my Refund?
   Electronic Filing

IRS want to give you:
    Earned Income Credit
    Adoption Credit

Business Expenses
    Office in Home
    Business Deductions

Latest News









Privacy Policy ......... About Us  ......  Disclaimer ..... Copywrited 2005 - 2006 & Developed by  Tax Moms