Internal Revenue Code (IRC) Section 1031 applies to the citizen or resident of the United States (US) or non-resident alien subject to US federal income taxes.When selling real and personal property held for productive use in a trade, business or for investment, a 1031 exchange allows individuals, partnerships, corporations, limited liability companies and trusts to defer the federal capital gain and recaptured depreciation taxes when selling property held for the proper intent, regardless of where the property is located. Property used predominantly in the US is eligible as replacement property held predominantly in the US, while property located outside the US is eligible for 1031 consideration with property held internationally.
What should a Title Officer know about the Foreign Investment Real Property Tax Act (FIRPTA) and a 1031 exchange? What IRS forms need to be filed and when? How does a 1031 exchange impact the transaction and FIRPTA reporting requirements are all questions a Title Officer or Attorney will face prior to the closing on real property interests owned by a foreign person.