1031 Exchange Answers by Top Calabasas Realtors
What is a 1031 Exchange?
The exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.
This is a much more complicated subject and should be answered by a qualifed professional. Contact your tax account for further information.
1031 Exchange – “like-kind” properties?
My clients often ask me: What is like-kind properties? Can we sell a single family home and buy a condominium? Can I sell commercial office building and buy an apartment building? The answer simply is yes. IRC Section 1031 does not limit “like-kind” property to certain types of real estate. The term refers to the nature or character of the property and not to its grade or quality.
The types of real estate which can be exchanged are extremely broad. The tax code states any real estate held for productive use in a trade or business or for investment – whether improved or unimproved is considered “like-kind”. Some examples of like-kind real estate are:
- Unimproved for improved property
- Commercial building for vacant land
- Industrial property for rental resort property
- Single family home for a condominium or industrial property
As you can see from the above examples, the definition of like kind under a tax deferred exchange is very broad. So what is NOT considered like kind real property?
- Personal Property
- Primary Residence
- Property held primarily for resale
- Stock in trade
Now, this is not to say you cannot do an exchange with personal property. Qualifying personal property must be “held for productive use in a trade of business or for investment. In general, qualifying properties must both be in the same General Asset Class or within the same Product Class.
As always, it is critical for any taxpayer to review any transaction with their own tax/legal advisors before entering into any 1031 Exchange.
Links Reference:
1031 Exchange Made Simple
Like-Kind Exchanges – Real Estate Tax Tips (IRS)
Internal Revenue Code Section 1031 (Wikipedia)
Conejo Valley Realtors Irina & Jeff Shoket
Conejo Valley Realtors serving: Serving Ventura & LA Counties: Agoura Hills, Calabasas, Camarillo, Lake Sherwood, Moorpark, Newbury Park, Oak Park, Ojai, Oxnard, Santa Rosa, Simi Valley, Somis, Thousand Oaks, Westlake Village, Woodland Hills, Wood Ranch, + Ventura
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For buyers, as your Realtor, we begin by establishing clear criteria for what constitutes your dream home and what you are looking for in your real estate buying experience. Then, we will make it our mission to find you that dream home. We will advise you throughout the home buying process to help you find not only a great home, but also a great investment. When it comes time to negotiate the terms of your dream home, we will ensure that we package an attractive offer, respond quickly and decisively to counteroffers, and act aggressively to outmaneuver other buyers in multiple-offer situations. We will also ensure that we adhere to the highest ethical standards throughout the negotiation process.
For sellers, we begin by learning about your unique situation. Taking into consideration your personal objectives, we will determine the pricing strategy and marketing plan for your real estate, that makes the most sense for you, your family, and your home. Then, we will devote ourselves to attracting qualified home buyers and advising you on how to best respond to evolving market conditions. As buyers begin to express interest and make offers, we will negotiate on your behalf to ensure you receive favorable closing terms and as much money as possible. Finally, we will ensure that your move is as comfortable and convenient as possible.
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