Just to be clear, 1031 Exchanges allow the investor to ‘defer’ their capital gains taxes on the sale of their investment real estate AS LONG AS it is ‘EXCHANGED’ for a ‘like-kind’ property within a certain time frame. To do this, following the guidelines below:
· The total purchase price of the ‘replacement’ property (the real estate you are buying) must be equal to, or greater, than the total NET sales price of the ‘relinquished’ property (the real estate you currently own and are selling).
· All the equity from the sale of the ‘relinquished’ property MUST be used to acquire the new investment property.
· You have 45 days FROM THE DATE OF SALE OF THE ‘RELINQUISHED’ PROPERTY TO ‘IDENTIFY’ another property or properties to purchase—this is called the ‘Identification Period.’
· You have 180 DAYS to receive title to the new investment property. The timeline starts 180 days after the date on which title is transferred out of your name, OR, the due date for the person’s tax return for that taxable year (whichever situation happens first).
· Neither time line for the Identification Period and Purchase Period is extendable, even on weekends or holidays.
· Handling the paperwork of a 1031 Exchange requires skill and expertise—You will need an Intermediary who specializes in 1031 Exchanges!