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Inform Me - 1031 Exchange

If you own oil and gas properties or investment real estate, one of the most important tax strategies you need to know about is the 1031 Exchange.


A 1031 Exchange is not a tax loophole. It is a section of the Internal Revenue Code, authorized by Congress, which allows anyone who meets Section 1031 requirements to sell property held for investment and defer paying taxes on the gain as long as the sale is matched, or exceeded, in value by the purchase of similar investment property.

There are specified IRS time and value guidelines that must be met, but the options for the replacement property are much more flexible than most people realize.

A few reasons to consider a 1031 Exchange include:

  1. Put your full equity to work in an alternative real estate or oil and gas investments by deferring capital gains and depreciation recovery taxes.
  2. Invest in a larger commercial property and eliminate management responsibilities through a Tenants-in-Common 1031 Exchange.
  3. Diversify your holdings by exchanging from one to multiple properties.
  4. Diversify your holdings by exchanging to different asset classes.
  5. Pass on more assets to your heirs.  Capital gains tax liability is forgiven upon the death of the investor as the heirs get a “stepped-up basis” on the inherited property.

The information above is not a complete guide to 1031 Exchanges, for more detailed information call 1-800-811-4036 or go to: www.RJBlandInvestments.com/section8.cfm

As with all major financial decisions talk to a tax attorney or tax consultant before proceeding with a 1031 exchange.

FIVE STEPS TO A 1031 EXCHANGE

  1. Use the proper verbiage in the closing contract of your relinquishing property.
  2. MUST use a Qualified Intermediary (QI) or accommodator.
  3. Find replacement properties.
  4. Name replacement properties within 45 days of closing.
  5. Close on replacement property within 180 days of closing.

For information on Qualified Intermediaries click on the link: www.RJBlandInvestments.com/featured_links.cfm

The information above is for informational purposes only. It is not a complete guide to the rules and regulations of an IRS 1031 Exchange.  For more detailed information call 1-800-811-4036 or go to: www.RJBlandInvestments.com/section8.cfm

As with all major financial decisions talk to a tax attorney or tax consultant before proceeding with a 1031 exchange.