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1031 Tax Exchange Requirements


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1031 Tax Exchange Requirement

To fully defer all capital gain taxes, the 1031 tax exchange must meet four 1031 Tax Exchange Requirements:

Reinvest 100% of Proceeds: The value of the 1031 real estate being purchased must be equal to or greater than the value of the commercial real estate being sold.

  • Debt on replacement commercial real estate is equal to or greater than the debt on the relinquished commercial real estate.

  • Third 1031 Tax Exchange Requirement: The real estate mustn't have constructive receipt of the sale proceeds during the exchange period or else all funds become taxable income. Typically, this is accomplished using a professional exchange facilitator to hold sale proceeds and execute the exchange documents.

  • Fourth 1031 Tax Exchange Requirement: Both relinquished and replacement commercial real estate must be like-kind. As used in IRC 1031(a), the words Like-Kind have reference to the nature or character of the commercial real estate and not to its grade or quality. One kind of class of commercial real estate may not, under that section, be exchanged for commercial real estate of a different kind or class.

    Contact us today to be put in touch with a qualified 1031 tax realtor for your next 1031 tax exchange.


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