Reverse exchanges under section 1031 of the Internal Revenue Code are less common than forward exchanges. However, these types of exchanges can be invaluable in certain situations. In this article, our topic is reverse 1031 exchanges. We’ll talk about what they are, and when to use them effectively.
What is a Reverse 1031 Exchange?
A reverse 1031 exchange is similar to a forward exchange, but done in reverse order. Rather than selling your relinquished property first (as you would do in a typical forward exchange), you sell your replacement property first in a reverse exchange. Then, within the following 180 days, you sell your relinquished property. All of the 1031 rules and requirements still apply to reverse exchanges. You still only have 180 days total to complete your exchange (with the first 45 days set aside as your identification period). All property used in the exchange must be like-kind and held for investment or business use.
When & Why to Do a Reverse 1031 Exchange
So what is the benefit of conducting a reverse 1031 exchange? If the end goal is the same, why not just do a forward exchange?
Reverse exchanges can be extremely helpful in a hot seller’s market when properties are moving fast. A reverse exchange allows you to nail down a replacement property first so you can rest easy during the remainder of your exchange period. Otherwise, you run the risk of not being able to find suitable replacement property during the 180 day exchange period.
Start Deferring Your Capital Gains Taxes
Start deferring capital gains taxes on your next sale of qualifying property by doing a 1031 exchange. IRC Section 1031 has many benefits and can be used by any United States taxpayer. Contact a 1031 exchange professional to learn more about the like-kind exchange process. At CPEC1031, LLC we have been servicing the 1031 exchange industry for decades. Our team can handle your 1031 exchange, no matter how simple or complex. Give us a call today to learn more about our services and see how we can help you through the details of your next like-kind exchange of real estate.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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