Keeping investment proceeds at work
Section 1031 provides a way to defer recognition of gain when qualifying real property held for investment or business use is exchanged for other qualifying real property. The tax treatment depends on the details of the transaction and the applicable requirements.
The role of your property
Investment and business real estate can be eligible. Property held primarily for sale and property used solely as a personal residence generally do not qualify. Discuss mixed use, ownership, and your plans for the replacement property with your tax advisor.
A qualified intermediary’s role
A qualified intermediary coordinates exchange documentation and the handling of sale proceeds under an exchange agreement. In a typical delayed exchange, you arrange the exchange before the sale closes and avoid receiving the proceeds yourself.
Planning before closing
Bring your intermediary and tax advisor into the conversation early. The sale contract, ownership structure, financing, and replacement property plans can all affect the exchange.
