This is a fantastic financial tool and option if you own investment property. Section 1031 of the Tax Code provides that taxpayers can defer capital gain tax on qualified real estate sales and investments. While complicated, in a nutshell, when a qualified property is sold and “exchanged” for a new property, the capital gain tax on the sold property is not due. The taxpayer/investor can use all cash from the sale, including funds that would have had to go to pay capital gain tax. This increased cash flow and buying power is the primary benefit of a 1031 Exchange.

As you can imagine there are a lot of regulations and statutory requirements to structure a “safe harbor” or proper 1031 Exchange. There are clear definitions as the “reasonable time” to complete and exchange, what qualifies and who qualifies, proper documents, how funds are handled, etc.

The most important factor is to have the exchange handled by a Qualified Intermediary where the security of the taxpayer funds are paramount and every transaction gets a new and unique bank account and funds are never commingled or pooled. We have strong relationships with a number of Qualified Intermediaries and companies. It is a great strategic relationship where they provide the 1031 expertise and RECS provides the title and closing services and local accountability. Click here for your referral request.