1031 Exchanges 101: What You Need to Know (On-Demand)

Course Description

People pay Federal and state taxes when they have gain on the sale of investment property. However, in an even trade, or if the investor trades up in value, there is no income with which to pay taxes. This logic is the basis for Code Section 1031. The IRS restricts the forms of trading to “like-kind” property and further defines the conditions under which a tax-deferred exchange occurs.

Principles

• Why investors use 1031 exchanges
• The mechanics of tax-deferred exchanges
• Examples to demonstrate the benefits to investors
• Tools for avoiding common pitfalls

Syllabus

1. Overview, Trends
   • • Reasons for exchanging
     • Trends in exchanges
2. Tax Implications
   • • Types of taxes and applicable rates
     • Depreciation benefits and recapture
     • Requirements for a fully tax-deferred exchange
     • Effect on replacement property
3. The Mechanics
   • • Timeframes
     • Required Documentation
     • How the proceeds must be handled
     • Identification rules
     • Holding requirement
     • Vacation homes/mixed-use property
     • Like-kind property
     • Same taxpayer requirement
4. Special Scenarios
   • • Partnership issues
     • Related parties
5. Closing Statements
   • • Expenses that affect the exchange
     • Earnest money deposits
6. Parking Transactions
   1. • Reverse exchanges: What they are, benefits, challenges
      • Improvement exchanges: What they are, benefits, challenges

Instructor

Janna Perret