1031 Exchange

A tax-deferred exchange is an approved method to sell investment properties and acquire one or more like-kind properties without paying any federal capital gains taxes (CGT) whatsoever. Most states also allow favorable capital gains tax treatment. When the exchange meets the criteria of the Internal Revenue Code Section 1031 and the regulations promulgated by the IRS, taxes are deferred until sometime in the future. For investments held by individuals, the deferral can continue through any number of exchanges until the tax liability is extinguished by death.

Some terms to aid you in understanding the process:

  • The exchangor(taxpayer)
  • The buyer for the relinquished property
  • The seller of the replacement property
  • Realtors® representing the exchangor, the buyer(s) and/or the seller(s)
  • Escrow holder(s)
  • Lender(s)
  • Attorney and/or financial advisor
  • First American Exchange as Qualified Intermediary

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