1031 Exchange Consulting & Compliance
Selling property that is used for business or investment purposes for capital gains is subject to IRC Section 1031 which allows for the deferral of those capital gains as long the exchange is for real property that is “like-kind.” “Like-kind” real property consists of single-family rentals, farms/ranches, office/commercial, motels/hotels, multi-family rentals, raw land, retail, industrial, and leasehold interests of 30 years or more. The replacement properties must be identified 45 days from the date of sale and the replacement property must be purchased within 180 days from the sale of the relinquished property. A 1031 exchange accommodator must be used to execute the exchange. Neglecting any one of the requirements will result in a disqualification of the exchange and the sale of the relinquished property being a taxable transaction. The 1031 exchange rules are complex, so it is important that a knowledgeable CPA and exchange accommodator is utilized.
1031 exchanges are one of the most effective tools that can be utilized to accumulate wealth over time. 1031 exchanges allow the deferral of capital gains while rolling a property’s equity into another property and there is no limit on the amount of times a 1031 exchange can be executed. Real property owners can exchange until death, after which the property will receive a step-up in basis, which means avoiding capital gains altogether, as heirs inherit the property as tax-free. 1031 exchanges can be utilized in conjunction with cost segregation studies to maximize and accelerate depreciation deductions on the property while simultaneously deferring capital gains. This combination is one of the most effective ways to accumulate wealth through real estate.
If you are interested in doing a 1031 exchange for one of your properties or need consulting on how to best structure your exchange, we have experts who specialize in 1031 exchanges that can assist you.
Our 1031 exchange services include:
- Preparation of 1031 exchange computations to determine adjusted basis of replacement property
- Preparation of Federal Form 8824 and CA Form 3840
- Consulting to ensure transaction is qualified and in compliance with the Code
- Consulting to determine the best strategy to execute complicated exchanges
- Consulting to determine viability of a cost segregation study to be used in conjunction with a 1031 exchange to maximize depreciation deductions and increase cash flow
- Assistance in implementing a cost segregation study with a 1031 exchange as well as computation of 481(a) adjustment for accelerated depreciation and preparation of Form 3115, if applicable
Download a Copy of our 1031 Exchange Services Handout