The basics for a 1031 tax-deferred exchange

By Ray the Realtor Kutylo
Signal Contributing Writer

I’ve been getting a lot of inquiries on tax-deferred exchanges lately, as real estate investors hear more about possible changes in how California treats property owners.

Proper disclosure by real estate agents must always be made that we are not tax accountants or attorneys, however 1031 TDX is a subset of real estate practice that I have training and experience in. In addition to real estate services, experienced and qualified escrow and professional  services are absolutely necessary to complete an IRS Code 1031 transaction.

The use of a skilled and knowledgeable accommodator is needed, and the requirements are strict. This is not an area of real estate practice for the inexperienced newbie or most part-timers. The following are some of the basics to keep in mind as a real estate investor considering a tax deferred exchange, as outlined by the Ken Harris at First American Exchange Company. Harris is the best of the best and a valued member of the SCV Home Team. Learn more at firstexchange.com/node/65.

Knowing some basic rules behind Internal Revenue Code 1031 can help investors defer paying capital gain tax on property dispositions, resulting in more money to invest in new property acquisition.

Generally, any real property can be exchanged, provided it is held “for productive use in a trade or business” or for “investment,” and is exchanged for property of “like-kind” that will also be held for one of these same purposes.

There are many facets to successful 1031 tax-deferred exchanges,  including:

  • always consider a 1031 exchange when selling non-owner occupied property;
  • house flipping and 1031 exchanges don’t always mix;
  • just the basics: tax-deferred exchanges under i.r.c. § 1031;
  • nine steps to 1031 success;
  • protecting your money: How to avoid risk in your 1031 exchange;
  • the advantages of a 1031 tax-deferred exchange;
  • top-10 1031 exchange misconceptions;
  • key considerations in 1031 exchanges with a qualified intermediary;
  • the top-10 1031 exchange terms you need to know;
  • when can i get my money back?
  • 1031 exchange benefits all investors’
  • don’t jeopardize your 1031 exchange;
  • how to calculate your capital gain;
  • and one exchange or many?

As you can see, there are a lot of very specific compliance issues to consider when embarking on a 1031 tax-deferred exchange, especially when you sell here in California and purchase out-of-state. (For more about these factors, you can contact a member of the SCV Home Team using the information below.)

Ray “the Realtor” Kutylo is the team leader of the SCV Home Team at Keller Williams VIP Properties. The Team brings experienced and professional service, commitment and value to every transaction, whether you are a home buyer or seller. Ray can be reached at (661) 312-9461 or by email at [email protected]. The views expressed are his own and not necessarily those of The Signal. CA DRE 00918855

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