1031 Exchange Resources
It seems that more and more people are buying investment properties on the Coast and the ability to take advantage of current tax laws can be a big part of the process. One of the best options for investment properties is a 1031 Exchange and it's very important to have a thorough understanding of the process in order to avoid any issues. Below, I've included several sections (compliments of North American Exchange Company) that will help guide you through the maze but you'll certainly need to get in touch with an intermediary as early in the process as possible.

What is a 1031 Exchange?
1031 Exchange is a tax strategy used by real estate investors to defer paying capital gains taxes when disposing of investment property. 1031 stands for the section of the internal revenue code that allows for tax-deferred dispositions. Exchange stands for the requirement that investors must exchange into replacement investment property after disposing of their relinquished property.

A 1031 Exchange is similar to a traditional IRA or 401K retirement plan. When you sell assets in tax-deferred retirement plans, the capital gains that would otherwise be taxable are deferred until you begin to cash out of your retirement plan. The same principal holds true for tax-deferred exchanges or real estate investments. As long as you continue to re-invest in other real estate, you are eligible for deferring your capital gains taxes. Unlike the aforementioned retirement accounts, your rental income on your real estate investments will continue to be taxed as net income is realized.

Another way to look at 1031 Exchange is as an interest free loan from the government. The government loans you money to pay for taxes that would otherwise be due immediately upon sale of your real estate investment. The loan is interest free and is not due until you "cash out" of your real estate investments. For certain investors, you may be able to defer your taxes indefinitely and never repay the loan.

Download the following .pdf documents for future reference...


1031 Exchange: The Real Estate Investors Best Friend - the basics of the 1031 exchange process and how to qualify for them.

Exchange Computations: How to Make and Survive Them - determine how much money you'll save by using a 1031 exchange.

Exchanges Involving Partners and Partnerships: Reading the Tea Leaves - how to handle 1031 exchanges when you have invested with partners.

Reverse Starker Exchange - questions and answers regarding your ability to buy your new property before the sale of your current property.

IRS Monitoring of 1031 Exchanges - How to avoid using your investment property improperly.

If you have any questions or need more resources or contacts, please don't hesitate to call or email me.