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1031 exchanges

Also Known As "Like-Kind Exchanges"

The IRS gave property investors a way to defer paying capital gains tax on a sale of an investment property. This can save you lots of $ because you can trade UP and scale UP your investment properties. As long as you don't touch ANY of the profits (gains) and reinvest into a NEW investment property (or properties) within the conditions set forth by the IRS (more on this below) don't pay Uncle Sam a dime. This, my friends, is how you grow your real estate portfolio over time. 

1031 Exchange Rules Overview

  1. Property Requirements

    • Must be held for investment or used in taxpayer's business.​

    • Cannot be stocks, bonds, or partnership interests.​

  2. Timing​

    • 45 days to identify replacement property after the close of the relinquished property.​

    • 180 days to acquire replacement property (includes the 45 days above).​

  3. Identification Requirements​

    • Three-Property Rule​ - 3 properties without regard to the fair market value of the properties. 

    • 200% Rule - any number of properties as long as their aggregate fair market value at the end of the identification period does NOT exceed 200% of the aggregate fair market value of all of the relinquished properties as the date the relinquished properties were transferred. 

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