What is a tax-deferred exchange? A tax-deferred exchange is also called a 1031 tax-deferred exchange, and 1031 is a section of the Internal Revenue Service that identifies investment property. The exchange aspect of it is if you exchange one piece of property of equal or greater value than the value of the property that you have, you don’t have to recognize any gain. You cannot accept any boot, and the amount of the liens or encumbrances on the property have to be equal or you have to have less equity in your property than the property that you’re acquiring as well as the purchase price being higher.
Now, the Internal Revenue Service has promulgated various regulations and rules as to how you can sell your property, and if you deposit the money with what they call an intermediary, you can then have a certain time period to select the property and you can select up to three properties and close on them within a six-month period. There are also other provisions as far as you can select as many as ten properties, but there are specific rules that you must follow in order to take advantage of a tax-deferred exchange.
If you have any questions about handling a 1031 tax-deferred exchange, give me a call at 727-847-2288. I’ll be happy to assist you. Thank you.