Here’s a brief history of the 1031 exchange.
The section 1031 provision and its predecessors have been in the code for over 100 years. Since 1921, there’s been a version of section 1031 that allows for the tax-deferred exchange of property. The rationale for giving you a pass on triggering the recognition of the gain is that you’re not cashing out. If you’re continuing your investment into other like-kind property, you’re able to defer your capital gains tax burden. The government allows you to do that, in part, because they want to stimulate economic growth. They don’t want you to be locked into your property. When real estate transactions are happening, bankers are making more loans, real estate agents are making more commissions, title companies are doing more closings, and more.
In 1979, a critical event in the world of 1031 exchanges occurred. A lumber baron named T. J. Starker broke the mold on 1031 exchanges. Prior to Starker, it was assumed that all exchanges needed to be simultaneous. Starker opted to give up his lumber holdings in Oregon in exchange for some properties that would be determined later. Basically, he did the first legal non-simultaneous exchange. That blew the IRS’s mind and they litigated it all the way to the Supreme Court, where Starker won. Today, nearly all 1031 exchanges are done in the mold of Starker’s non-simultaneous exchange.
In the 1980s-1990s, the IRS got Congress to authorize the Treasury to write their own regulations regarding 1031 exchanges. These rules were written to limit the number of people conducting 1031 exchanges. They introduced the 180 day deadline, as well as the 45 day identification period.
When the IRS came out with the initial regulations for forward exchanges in 1991 they didn’t outline specifics for reverse 1031 exchanges. Then in the year 2000, rev. proc. 237 was issued on how to do safe harbor reverse exchanges.
In 2018 the Tax Cuts and Jobs Act limited 1031 exchange property to real estate and eliminated the use of personal property.
Find a Qualified Intermediary for Your Next 1031 Exchange of Real Estate
Find a qualified intermediary for your next 1031 exchange of real estate by contacting CPEC1031, LLC today. We have more than two decades of experience working on 1031 exchanges of all shapes and sizes. We are well equipped to handle all the unique details of your next like-kind exchange under section 1031 of the Internal Revenue Code. Whether your doing a forward exchange, reverse exchange, or something in between, our qualified intermediaries are ready and waiting to help ensure you defer 100% of your capital gains tax burden.
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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