What is a Section 1031 Exchange?

One of the questions we often hear is What is a 1031 Exchange? Why should I use a 1031 Exchange? When should I use a 1031 Exchange?

The sale of a rental property generally triggers capital gain taxes and depreciation recapture. It can also trigger the Medicare Surcharge often referred to as the Obamacare Tax. The 1031 Exchange is a way to defer the payment of the capital taxes, depreciation recapture taxes and triggering the Medicare Surcharge or Obamacare Taxes.

The term 1031 Exchange is named after Section 1031 of the Internal Revenue Code. Typically, 1031 Exchanges involve the sale of rental or investment real estate. The benefit to the real property owner or investor is that they get to build their wealth faster by keeping all of their money working for them instead of paying taxes.

There are specific requirements real estate investors must follow to qualify for tax-deferred exchange treatment under Section 1031. In order to defer all of their taxes, they must reinvest in one or more replacement properties of equal or greater value. They must identify their replacement properties and complete their 1031 Exchange within very specific tax-deferred exchange time frames.

1031 Exchange transactions are also referred to as tax-deferred exchanges, like-kind exchanges, starker exchanges, delayed exchanges or tax-free exchanges.

1031 Exchanges are complex, that's why you need an expert! Call Exeter 1031 Exchange Services, LLC at (619) 239-3091 or visit http://www.exeterco.com.