1031 Exchange
What is a 1031 Exchange?
The Internal Revenue Code* provides that a taxpayer may sell real property held for productive use in a trade or business or for investment and defer payment of capital gains tax, if that taxpayer uses the proceeds to acquire a like-kind replacement property.
Why Exchange?
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Capital gains tax is significant
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Reinvestment into replacement property allows taxpayer to leverage dollars that would otherwise be spent on taxes
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Allows for non-income producing property to be replaced with income-producing property
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Allows taxpayer to diversify portfolio and minimize risk
What Provo Land Title Exchange Does
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Act as Qualified Intermediary (QI), as required by the Treasury Regulations
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Prepare all documents required for the exchange
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Consult with your tax advisor
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Execute closing documents
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Hold the exchange proceeds to avoid constructive receipt of funds
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Coordinate with the closing agents, real estate professional, and tax and legal advisors
As a result of tax reform legislation, 1031 exchanges are no longer allowed on personal property, effective January 1, 2018. Below are examples of like-kind real property transactions that still qualify for IRC Section 1031 treatment:
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Commercial building for a ranch or farm
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A leasehold interest of 30 years or more for a fee interest
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Rental house for farmland
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Improved real property for unimproved real property
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Conservation easement in one farm for fee interest in another farm
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A utility easement for a utility easement