I just finished teaching the Professional Real Estate Investor Class and one of my students had a great interest in learning about 1031 exchanges. I teach the ins and outs of a delayed exchange in the class, but thought I would open up the topic to all my readers and give you something to think about.
What is a 1031 exchange? A 1031 exchange can provide real estate investors with one of the best tax strategies for preserving the value of an investment portfolio and expanding it. By using an exchange, the investor is able to defer the recognition of capital gains taxes that would otherwise be incurred on the sale of an investment property. Now the investor can take the entire amount of the equity they have accumulated and purchase substantially more replacement property.
There are five types of exchanges: Delayed, Simultaneous, Build-to-Suit, Reverse, and Personal Property. In this article I’ll outline the two most common, Delayed and Simultaneous.
Delayed – also known as Straightforward Exchange:
This is the most common type of exchange. Certain IRS requirement must be met to structure a delayed exchange. This arrangement gives the investor the advantage of the full exchange period.
The process is 4 basic steps:
1) Open the exchange – an investor must open an exchange account with a QI… Continue Reading
