What is 1031 Exchange? Selling investment property typically incurs capital gains taxes, but a 1031 exchange defers them by reinvesting proceeds into "like-kind" property. Here are the three key elements of this process.
Core Principle of a 1031 Exchange
A 1031 exchange defers taxes by swapping like-kind investment properties, reinvesting savings, and expanding portfolios, though deferred taxes are due if the replacement property is sold without another exchange.
Scope and Limitations of the 1031 Exchange
Not all properties qualify for a 1031 exchange. Eligible properties must be for investment or business use, excluding personal residences, vacation homes, and quick flips. "Like-kind" allows diverse real estate exchanges.
The Role of Sparks Exchange Specialists (QI)
A Qualified Intermediary (QI) is vital for a 1031 exchange, managing funds, deadlines, and compliance to ensure tax-deferred status and seamless execution.
