1031 Exchange

What is a 1031 Exchange?

 

The Internal Revenue Code* provides that a taxpayer may sell real property held for productive use in a trade or business or for investment and defer payment of capital gains tax, if that taxpayer uses the proceeds to acquire a like-kind replacement property.

Why Exchange?

  • Capital gains tax is significant

  • Reinvestment into replacement property allows taxpayer to leverage dollars that would otherwise be spent on taxes

  • Allows for non-income producing property to be replaced with income-producing property

  • Allows taxpayer to diversify portfolio and minimize risk

 

What Provo Land Title Exchange Does

  • Act as Qualified Intermediary (QI), as required by the Treasury Regulations

  • Prepare all documents required for the exchange

  • Consult with your tax advisor

  • Execute closing documents

  • Hold the exchange proceeds to avoid constructive receipt of funds

  • Coordinate with the closing agents, real estate professional, and tax and legal advisors

 

As a result of tax reform legislation, 1031 exchanges are no longer allowed on personal property, effective January 1, 2018. Below are examples of like-kind real property transactions that still qualify for IRC Section 1031 treatment:

  • Commercial building for a ranch or farm

  • A leasehold interest of 30 years or more for a fee interest

  • Rental house for farmland

  • Improved real property for unimproved real property

  • Conservation easement in one farm for fee interest in another farm

  • A utility easement for a utility easement

For a more in depth look at 1031 exchanges, please watch the video below from the American Land Title Association

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