Sections 121, 1031 & 1033: What is Your Sale?

Sections 121, 1031 & 1033: What is Your Sale?

There are times when a property can be relinquished using section 1031 or 1033 of the internal revenue code. Each section can offer benefits and pitfalls, the following is a brief comparison.

Sections 121, 1031 & 1033: What is Your Sale? - Chart

This comparison exhibits the basic differences between the involuntary conversion of property (IRC 1033) and the exchange of an investment property (a 1031 exchange). Investors will find that section 1033 offers an advantage in time and ease.

When an investor is involved in a 1031 tax deferred exchange, they will find very little difference from the sale and replacement of any property. A competent facilitator will take away the mystique of the 1031. A facilitator will coordinate with the escrow company, create the “Exchange and Novation Agreements”, and inform the agent of their client’s time requirements.

The replacement property cannot be acquired from a related party. You may acquire a controlling interest in a corporation that owns like-kind property.

* Additional cash may offset a reduction of mortgage

** If real property held for productive use in trade or business or for investment is (as the result of its seizure, requisition, or condemnation, or threat or imminence thereof) compulsorily or involuntarily converted, property of a like kind to be held either for productive use in trade or business or for investment shall be treated as property similar or related in service or use to the property so converted.

*** May be extended

Equity Advantage is often contacted to structure a 1033 exchange for a client, but unlike section 1031 we are not needed. The 1033 exchange does not require an Accommodator, though we are happy to answer any questions you may have.


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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. About Us…