Can I exchange personal property?
No. Under the Internal Revenue Code, personal property may no longer be exchanged.
I have found a replacement property but haven’t sold my own yet. Can I still do a 1031 exchange?
Yes. The exchange would be documented as a Reverse Exchange. It can be more complicated that the standard Delayed Exchange due to several legal requirements.
Can I use my vacation or personal home in a 1031 Exchange?
No. IRC regulations require that the relinquished property not be the investor’s primary residence. A vacation home may qualify under certain circumstances depending on how regularly the home is used. To find out whether your vacation home would qualify for an exchange, call one of our attorneys here at Wolterman Law Office.
When I list the property for sale, does my realtor need to mention that it’s a 1031 exchange?
Yes. You will need to notify your realtor and include a passage in the contract to advise the buyer or seller that your are conducting a 1031 exchange.
Am I required to have a mortgage on the replacement property?
No.
What rules do I have to follow in order to receive a full tax deferral benefit?
The following provisions must be met in order to defer all capital gains taxes through a 1031 Exchange:
· All deadlines must be met (the 45-day and 180-day periods)
· The exchange must consist of a like-kind relinquished property and replacement property.
· The value or sum value of the replacement properties must be of equal or greater value that the relinquished property value (The Napkin Rule).
· Proceeds from the sale of the relinquished property must be used in purchasing replacement property (All Proceeds Rule).
What defines a “like-kind” property?
Two properties that are of similar character are considered like-kind. If the real property is used for investment or income purposed, it can be exchanged.
