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What's a 1031

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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 Gains Tax.

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

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This taxation information comes to you as a service and as part of my continuing education program for the real estate community. While designed to provide accurate and authoritative information, it is not meant as a substitute for your own CPA, professional tax advisor, or attorney. Tax planning depends on your individual facts and circumstances. You should always consult with your own tax advisor to determine if the ideas and techniques discussed here apply to your situation

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