Among our specialties at District, is helping clients navigate 1031 Exchanges. It can be complicated, but it can also be a valuable and lucrative tool for clients. Learn more below and reach out to see how we can help you. .
In broad terms, a 1031 Exchange (also referred to as a "like-kind exchange") provides an exception to a seller of a business or investment property for the payment of tax on the gain at the time of the sale. The exception allows a seller to postpone paying tax on the gain if the seller reinvests the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange is tax-deferred, but it is not tax-free. The use of a 1031 Exchange has always been a powerful tool for owners of investment and business property
Both the relinquished property and the replacement property must meet certain requirements, like being held for use in a trade or business or for investment and be similar enough, to be considered "like-kind".
Property owners can also utilize the Reverse Exchange, which involves first acquiring the Replacement Property before the Exchangor sells the Relinquished Property. The Replacement Property is acquired through an exchange accommodation titleholder, where it is "parked" for no more than 180 days. The Exchangor must identify what Relinquished Property will be sold within 45 days after the accommodator closes on the Replacement Property. During the time the property is "parked", Exchangor sells the Relinquished Property.