1031 Exchange Requirements
1031 Exchange Requirement
To fully defer all capital gain taxes, the 1031 exchange must meet four 1031 Exchange Requirements:
Reinvest 100% of Proceeds: The value of the 1031 property being purchased must be equal to or greater than the value of the
rental property being sold.
Debt on replacement rental property is equal to or greater than the debt on the relinquished rental property.
Third 1031 Exchange Requirement: The property owner must not have constructive receipt of the sale proceeds at any time during this exchange period or the money becomes taxable income. Typically, this is accomplished by using a professional exchange facilitator as a middleman to hold the sale proceeds and execute the exchange documents.
Fourth 1031 Exchange Requirement: Both relinquished and replacement rental property must be like-kind. As used in IRC 1031(a), the words Like-Kind have reference to the nature or character of the rental property and not to its grade or quality. One kind of class of rental property may not, under that section, be exchanged for rental property of a different kind or class.
Contact us today to be put in touch with a qualified 1031 real estate attorneys for your next 1031 exchange.