[VIDEO] The Basics of 1031 Exchanges for Real Estate Investors

If you own investment property, you need to know how the IRS Section 1031, commonly referred to as a 1031 exchange, can work for you. A 1031 exchange is a strategy that allows an investor to defer capital gain taxes by selling a property and then reinvesting the proceeds into a new, like-kind property.

Here are the basic rules of the 1031 exchange:

First, the taxpayer who sells must be the same taxpayer who buys.

Second, you must identify the new property within 45 calendar days after closing on the first property.

Third, you must purchase the replacement property within 180 calendar days after closing.

Fourth, the replacement property price must be equal to or greater than the old property.

If the new property price is less than the old one, the difference may be taxed. A 1031 exchange can be a powerful tax-deferment strategy offering many opportunities to investors.

***************

The views expressed in this commentary are subject to change based on market and other conditions. This video may contain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Malcolm Ethridge, CFP® is the Managing Partner of Capital Area Planning Group based in Washington, DC. He is also the Managing Partner of Capital Area Tax Consultants. 

Malcolm’s areas of expertise include retirement planning, investment portfolio development, tax planning, insurance, equity compensation and other executive benefits. 

 Disclosures:

The information provided is for educational and informational purposes only, does not constitute investment advice, and should not be relied upon as such. Be sure to consult with your legal advisors before taking any action that could have tax and legal consequences.

Investments in securities and insurance products are:

NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE