What is a 1031 Exchange?
In the summer of 1990, the I.R.S. finally came
out with the long awaited rules on Deferred Exchanges. Section 1.1031 of the Internal Revenue Code laid out in detail the
procedure for turning a sale and purchase type transaction into an exchange.
These new rules allowed owners of certain types
of like kind Real and Personal property to sell their property and buy other like kind property without paying the Capital
The like kind provision for Real property is
quite broad, and includes Land, Rental, and Business property. Any of which, can be exchanged for the other. The like kind
provision for Personal property is more restrictive.
This type of property must be in productive
use in a business (depreciable property), and can only be exchanged for the same type of property.
As an example a business aircraft for a business
aircraft (a fixed wing airplane for a helicopter will work), or a commercial truck for a commercial truck, etc.
The rule also required that the "Exchanger"
use a safe harbor to hold the proceeds while the exchange was in progress, and spelled out what those safe harbors were.
The only practical safe harbor for most "Exchangers"
is a "Qualified Intermediary."
Realty Exchangers, Inc., is a qualified intermediary,
and is set up to assist you in making a smooth and easy exchange.
The rules also required certain time limits
and other requirements, all of which are described in our free Procedure
Manual, which you can download from this site.
If you have questions after reading it, please
contact Ginger Hopp