1031 Exchange

What is a 1031 Tax Exchange

A 1031 exchange is a process where investment properties are exchanged without any tax impact to the owner. This process has to be done through a neutral third party called a qualified intermediary. Attorney Joseph Tudino has set up a qualified intermediary called Tax Swap LLC which he acts through.

1031 Exchange Process

The process starts by selling the investment property that you own. Your Closing agent will then contact the qualified intermediary so that they may order the exchange documents. You will then enter into a 1031 exchange agreement. This agreement names the qualified intermediary as the principal in the sale of your property and the incoming purchase of the next property. The qualified intermediary will hold the proceeds of the sale in escrow for the next pruchase. Once the agreement closes you have 45 days to identify the replacement property and 180 days to close on the new property.

Benefits of 1031 Tax Exchange
The benefits of a 1031 exchange is that it defers capital gains tax on the sold property. The money gained from the sale of the first property is never handled by the seller it is instead held in escrow by the qualified intermediary. Since the money is going to be used to buy a like-kind property the gains from the sold property will not be recognized by the IRS.