1031 Exchange Guidelines

• Guidelines
• Types of Exchanges
• Step By Step
• FAQ

Guidelines Continued

• 100% Tax Deferral
  To defer 100% of the capital gains tax liability, two requirements must be met
  1. Reinvest all the cash that was generated from the sale of the relinquished property and;
  2. Purchase property equal or greater in value to the relinquished property.
  The two requirements listed above can be accomplished in a variety of ways. For example, an investor selling a $500,000 rental, with $200,000 in equity, can purchase two $300,000 properties with a $100,000 down payment on each.

A partial exchange is also possible.  A partial exchange occurs in a trade down situation, where the replacement property is of less value than the relinquished property (i.e. sell for $500,000 buy for $400,000).  A partial exchange will result in a partial deferment of the tax liability.  Some but not all of the taxes will be owed.