What is a Starker 1031 Exchange?

In this 1031 FAQ video, Jeff Peterson talks about Starker exchanges and the history of section 1031. Watch more 1031 educational videos here.

Video Transcript:

Many people ask “who is this Starker character and why are these exchanges called Starker 1031 exchanges?”

There was a lumber baron in Oregon who was named Starker who had this novel idea that 1031 exchanges did not have to be simultaneous horse swaps, where the taxpayer gave up his relinquished property and immediately and simultaneously received his new replacement property.

Instead Starker had this idea: “hey I think I'll give up my relinquished property in exchange for some replacement properties that I'll receive some time in the future.”

Well Starker blew the paradigm of what a 1031 exchange was known. The IRS challenged his exchange but the IRS lost on a procedural argument and Starker prevailed.

Starker opened up the door for this entire industry of delayed exchanges in which taxpayers give up relinquished property and later at some future date received their new replacement property. In 1991 the IRS constrained this process by issuing treasury regulations that limited The Exchange period Down to 180 days and further required taxpayers to identify the replacement property within the first 45 days. so it's no longer the Wild Wild West that Starker opened up for us back in the 1970s.

  • 1031 Hotline: If you have questions about Starker 1031 Exchanges, feel free to call me at 612-643-1031.

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