Six Additional 1031 Exchange Tips

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Six more tips to consider when considering a 1031 exchange.

1. A Qualified Intermediary earns income from a fee and optionally on interest earned on the exchange proceeds.

2. Don't let price be your only criteria when selecting an Intermediary. Consider

• Expertise
• Security
• Transparency
• State Regulations
• Accessibility

3. There are many types of 1031 exchanges, including:

• Forward - selling the old property before buying the new property.
• Reverse - acquiring the new property before the sale of the old property.
• Build to Suit/Improvement - using exchange proceeds to make improvements to new property.
• Simultaneous - dlosing on the new and the old property at the same time.
• Non Safe Harbor - when the time frame exceeds 180 calendar days.
• Like kind Exchange (LKE) Program - 100 or more assets routinely replaced.

4. 1031 exchanges are not tax free, rather they defer the payment of the tax until the sale of the replacement property. The only exception may be if the property is received by a beneficiary and then immediately sold. This known as stepped up basis. Talk with your accountant.

5. Real property not eligible for 1031 exchanges include:

• Primary residence;
• Partnership interests;
• Stocks and securities;
• Inventory;
• Paying down debt.

6. Nonresident alien individuals and foreign corporations use 1031 exchanges to defer taxes.

• Review FIRPTA requirements.

Conclusion

There are many 1031 exchange rules to consider. Be sure to contact a Certified Exchange Specialist® when engaging a qualified intermediary.