How To Complete A Successful 1031 Exchange

With a 1031 exchange, an investor can keep money that would ordinarly be paid in taxes. This is why an exchange is a powerful tool to create additional wealth. However, not every property transaction qualifies as a 1031 Exchange. To enjoy a successful exchange, four basic tenets must be followed:

The property in question must be held for productive use in a trade or business or for investment purposes – it cannot be your personal, primary residence.

The property exchanged must be “like kind” property, meaning the relinquished property and acquired property are similar in nature or character.

The purchase price of the replacement property must be equal to or greater than the sale price of the relinquished property.

All the equity received from the sale of the relinquished property must be used to purchase the replacement property.

If your transaction does not meet even one of these requirements, partial or full tax responsibility will likely follow. This is why it is important to rely on the expertise of a professional well-schooled in the nuances of 1031 exchanges. He or she can guide and advise you to a successful exchange.

To learn more about 1031 exchanges or our qualified intermediary and replacement property locator services, please visit our website.