1031 BASICS

A 1031 Tax-Deferred Exchange is a transaction in which the capital gains tax deferral is available to real estate owners who sell their investment real estate and reinvest the net proceeds into another “like kind” investment real estate property.

Like-kind properties can be classified as any real property that is held for productive use in a trade or business or for investment. Some examples of qualifying properties are listed below:

30 Year Lease
Apartment Building
Condominium Rental
Duplex
Office/Industrial
Rental Homes
Retail
Vacant Land

Real estate owners may sell like-kind properties and defer taxes on the net proceeds by meeting the requirements of Internal Revenue Code (IRC) 1031 exchange, which states in Section 1031(a) (1):

“No gain or loss shall be recognized on the exchange of property held for productive use in trade or business or for the investment if such property is exchanged solely for property of like-kind which is to be held for productive use in trade or business or for investment.”

There are two very important time frames that a seller of investment real estate should be aware of:

A maximum of 180 calendar days from the closing of the initial sale to complete the exchange
The first 45 days of this period a seller must identify real estate property(ies) and properly identify them to FNF 1031 Exchange Services, Inc.