Consider a Tax-Free Exchange When Selling (or Even When Buying)

Section 1031 of the Internal Revenue Code allows exchanging one piece of investment real estate for another without paying income taxes.

Core Requirements

1. Like-Kind Properties: Both must be real estate held for investment or business
2. 45-Day Designation: Replacement property must be identified within 45 days
3. 180-Day Closing: Purchase must close within 180 days
4. No Access to Funds: Trust holder cannot release money until the period expires

Tax Considerations

Any leftover cash (“boot”) becomes taxable. Strategic refinancing can minimize tax liability.

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