After 32 years of business we take customer service very seriously, so if you’ve got a question, we probably have the answer waiting for you in our FAQs. Here are a few of them:
Does My Property Qualify?
Any property held for productive use in a trade or business or for investment can be Exchanged for like-kind property. Like-kind refers to the nature of the investment rather than the form. Any type of investment property can be Exchanged for another type of investment property. A single-family residence can be Exchanged for a duplex, raw land for a shopping center, or an office for apartments. Any combination will work. The Exchangor has the flexibility to change investment strategies to fulfill their needs.
If we find the asset being relinquished does qualify for a 1031 Exchange, the next question is what the replacement property will be. As discussed previously, section 1031 applies to both “real property” and “personal property.” The primary difference between a personal property Exchange and a real property Exchange is the definition of like-kind.
What Does NOT Qualify For a 1031 Exchange?
Property held for productive use in a trade or business or for investment qualifies for a 1031 Exchange. But the tax code specifically excludes some property even if the property is used in trade or business or for investment. These excluded properties generally involve stocks, bonds, notes, securities and interests in partnerships.
Property held “primarily for sale” is also excluded. This excluded property would include business inventory. For real estate, it means property purchased with the intent to sell it, such as a fixer-upper or vacant land to be developed into a house. An investor who “turns” residential properties, or a private developer, may be classified as dealer.
Is It Possible to Exchange Out of One Property and Into Multiple Properties?
It does not matter how many properties you are exchanging in or out of (1 property into 5, or 3 properties into 2) as long as you go across or up in value, equity and mortgage. The only concern with exchanging into more than three properties is working within the time and identification restraints of section 1031.
How Do I Get Started In a 1031 Exchange?
Getting started with an Exchange is as simple as calling your Exchange Facilitator. Before making the call, it will be helpful for you to have information regarding the parties to the transaction at had (for example, names, addresses, phone numbers, file numbers, and so on). During the phone call, the Exchange coordinator will ask questions about the property being relinquished and any proposed replacement property.
The initial discussion will vary dramatically from company to company with respect to the amount of detail requested. There is very little actual information required to structure a basic delayed Exchange. We at Equity Advantage take a more in-depth approach to the process; we like a proactive rather than reactive position. The more we understand our client’s objectives, the better equipped we are to help them achieve them. For this reason, we encourage our prospective clients to both ask questions and answer ours.
What Are the Time Requirements In an Exchange?
From the time of closing on the relinquished property, the investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property.
Identification requirements: The investor must identify the replacement property prior to midnight on the 45th day. The investor normally nominates three potential properties of any value, and then acquires one or more of the three within 180 days. Typically, a common address or an unambiguous description will suffice. If the investor needs to identify more than three properties, it is advisable to consult with your 1031 facilitator.
Is It Possible To Do An Exchange Using the Proceeds From the Sale to Improve a Property That I Already Own?
While not considered a conservative option, there are several “liberal” letter rulings that recognize this as a viable strategy. If this is an option that interests you, please call us so we can send you additional information.
After Buying a Rental Home, How Long Do I Have to Hold It Before I Can Move Into It?
There is no designated amount of time that you must hold a property before converting its use, but the IRS will look at your intent. You must have had the intention to hold the property for investment purposes. This could include, but does not require, renting the property out at a fair market value. Since the government has twice proposed a required hold period of one year, we would recommend seasoning the property as investment for at least one year prior to moving into it. A final consideration on hold periods is the break between short- and long-term capital gains tax rates at the year mark.
Hope that answered your potential questions! If not, feel free to shoot us a question by replying to this email or giving us a call at 800-735-1031.
Get Your Spot – Less than 2 Weeks Left to Register
Are you ready for a fun day of real estate tax tricks and treats? Join us for the 1031 Summit, hosted by the Equity Advantage team. This one-of-a-kind event promises to be both educational and entertaining, as we delve into the world of 1031 Exchanges and more, all while celebrating the 10/31 spirit and our 32 years of business!
Topics include everything from – ways to get deals done, 1031 Exchange basics, DST’s, QOZ’s, and more. Network with professionals in the community while getting your CE credit done.
Registration is FREE! We will be dressed if you would like to show us your best costume.
Available for 1-4 Credit Hours.
Coffee, tea and snacks will be provided.
Robert Speidel of Inland Private Capital
Inland Private Capital Corporation is a sponsor of alternative public and private real estate securities, and provides opportunities for individuals to invest in real estate programs.
Inland is involved in every aspect of commercial real estate and is responsible for several innovations that have shaped the industry. Since inception they have sponsored 823 real estate investment programs serving more than 490,000 investors across all major commercial real estate sectors.
Garry Schnell of SMI Funding / Lawstein
A seasoned attorney licensed in Oregon, Washington and California since 1994, Garry combines extensive legal expertise in business and taxation. He completed his education at Gonzaga University School of Law and earned an LLM in Taxation from the University of Washington.
Garry furthered his legal career at Sidley Austin, working on transactions for Intel and Google. This lead to COO and General Counsel for the Yoshida Group, a major private company, where he managed legal matters and played a pivotal role in executing business plans.
David Moore, Co-Founder of EAI
David founded Equity Advantage with his brother Tom in 1991, after a successful real estate investment career. David is a nationally recognized expert on 1031 Exchanges and a former board member of the Federation of Exchange Accommodators. He is also a Certified Exchange Specialist (CES).
At Equity Advantage, our goal is to help you protect equity in your investments while giving you the freedom to pursue your dreams!
& MORE to COME!
This event will take place IN-PERSON from 9am to about 2pm PT. Specific class titles and times will be posted shortly.
Try Our Capital Gains Calculator 👻
Check out our capital gains calculator to illustrate potential taxes if you sell your property rather than Exchange.
An investor that holds property longer than 1 year will be taxed at the favorable capital gains tax rate. Otherwise, the sales gain is taxed at the ordinary income rate.
Catch The Latest From ADVANTAGE TV
The term “gain” is often thought of as profit, yet the two terms have totally different tax meanings. Gain is simply the adjusted sales price minus the basis in a property.
In a foreclosure the debt on the property is considered to be the sales price. Therefore, if the debt is greater than the basis an investor WILL realize a gain even when losing the property, and any equity in a foreclosure!
When considering the sale of investment property, even in a hardship situation your ability to preserve all opportunities can make a tremendous difference. This “phantom” gain scenario has snuck up on more than one unfortunate seller, but a 1031 Exchange can eliminate any such tax exposure.
For more information head online to 1031Exchange.com or subscribe to our channel below 🎬
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
