Real Estate Like Kind Exchange Rules
Carl E. Sera, CMT
June 4, 2020
Are you looking to sell one or more of your investment properties? Do you hesitate because of the four taxes you would have to pay immediately? What if there was a way to permanently avoid these four taxes as well as any future estate taxes?
If you fit this profile, you need to know how a 1031 exchange can work for you.
A 1031 exchange is a powerful tax and estate planning strategy that allows an investor to immediately defer the four major taxes due when selling appreciated, low-cost basis, real estate. It then allows you to reinvest the proceeds into a new like kind replacement property.
There are two types of like kind replacement properties permitted.
The first is real property and the second is securitized property.
This means the investor can sell their real property and invest in other real property or they can sell their real property and invest in securitized property. This lets the investor choose the option that’s right for them.
Here are the basic rules of a 1031 exchange:
- First, the taxpayer who sells must be the same taxpayer who buys
- Second, you must identify the new property within 45 calendar days after closing on the first property
- Third, you must purchase the replacement property within 180 calendar days after closing
- And fourth, the replacement property price must be equal to or greater than the old property.
But what if the replacement property price is less than the relinquished property?
Don’t worry, there are still a number of ways to save on the 4 taxes.
To learn more about 1031 exchanges or real estate like-kind exchanges, reserve your 30-minute time slot on our calendar now at no cost to you.