What Is A 1031 Exchange?

A 1031 Exchange, also known as a Like Kind Exchange is a transaction under United States law which specifies that if an asset (usually some form of real estate such as land or a building) is sold and the proceeds of the sale are then reinvested in an asset of a similar kind (like kind asset), then no capital gain or loss is recognized, allowing the deferment of capital gains taxes that would otherwise have been due on the first sale. This law is defined under section 1031 of the Internal Revenue Code, 26 U.S.C. § 1031.

It is available to real estate owners who sell their investment, rental, commercial or business property and reinvest the net proceeds in other real estate. A broad definition of real estate applies and includes land, commercial property and residential investment properties. Real Estate held for productive use in a trade or business or held for investment purposes are considered "like-kind" properties and will qualify for a 1031 exchange.

The purpose of the 1031 Exchange is to allow sellers of like-kind property to buy replacement property of like-kind within a specific time period and defer taxes. In order to qualify for this exchange, certain rules must be followed

Within the first 45 after closing, the seller must identify exchange candidate properties and then close the transaction within 180 calendar days. A seller can identify up to three possible properties for the exchange. A Gas Station Business property purchase or sale would qualify for this tax benefit. For further information please contact our office 1-866-644-6555.