1031 Exchanges Explained

1031 Exchange

1031 tax exchanges represent a great opportunity for investors to increase their income potential without increasing their out-of-pocket taxes. This process allows a property owner to sell one (or more) properties and transfer that equity to one (or more) replacement properties. At the same time, the property owner is able to defer capital gains taxes on the profit.

Phil Atwan Explains

Brad Jones of The Shannon Jones Team recently interviewed Phil Atwan, Senior Vice President at Exchange Resources. Phil is a Qualified Intermediary so he professionally facilitates 1031 exchanges. You can watch the video down below, or, read our breakdown of 1031 exchanges below.

1031 Exchange Breakdown

During a 1031 exchange, the sale and purchase must be properly structured. There are very specific requirements that must be followed for the transaction to qualify for tax deferment. For more on IRS code 1031, please visit the IRS website. Property used primarily for personal use doesn’t qualify for a 1031 exchange. This includes a primary residence or a second home or a vacation home. However, there are other capital gains exemptions that apply to personal residences.

When completing a 1031 exchange, the proceeds are first held by a third-party intermediary. Afterward, they are transferred to the escrow company for the purchase. It’s important to know that if the investor receives cash or proceeds from a sale before the exchange is complete, it may mean all the gain is taxable.

It’s important for an investor to work with a Realtor who is knowledgeable about 1031 exchanges as well as a reputable Qualified Intermediary like Phil. The 1031 exchange expert and the Realtor can provide guidance and make sure all rules and timelines are carefully followed.

Basic Requirements of a 1031 Exchange

  • The taxpayer who sells the property must be the taxpayer who buys the new one.
  • You must identify a new property within 45 calendar days of closing escrow on the first property.
  • Taxpayers can identify four or more properties as long as the value does not exceed 200 percent of the property sold.
  • The taxpayer must complete the purchase of replacement property within 180 calendar days of closing on the first property
  • The price of the replacement property must be equal to or greater than the old or relinquished property

Need More Information?

Phil Atwan or The Shannon Jones Team would be happy to speak with you about 1031 Exchanges. To get in touch with Phil, please visit the Exchange Resources website here. To get in touch with The Shannon Jones Team, please fill out the form below or give us a call at 562.896.2456.

Interested in hearing from more experts? We recently did another interview discussing Proposition 19. You can watch that article and read more about it here!

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About the Author

Shannon Jones has been selling real estate since 1998 and specializes in listing and marketing homes. She has consistently been one of the top Realtors in the Long Beach area. Prior to her award-winning career in real estate with the Shannon jones Team, Shannon has had successful careers in journalism and public relations. She holds a bachelors degree from UC Irvine and a masters degree from UC Berkeley. Shannon holds E-Pro, CDPE (Certified Distressed Property Expert), and PSC (Pre-Foreclosure Specialist) certifications. Shannon is very personable and maintains a very strong moral compass, always putting the best interest of home buyers/sellers above monetary goals. A California native, Shannon enjoys gardening, travel, reading, cooking and poker when she’s not selling homes MY DESIGNATIONS Lic# 01247705 | CDPE (Certified Distressed Property Expert) | E-Pro | PSC (Pre-Foreclosure Specialist) MY SERVICE AREAS Anaheim Bellflower Buena Park Carson Cerritos Cypress Downey Fountain Valley Garden Grove Huntington Beach La Palma Lakewood Long Beach Los Alamitos Los Angeles County Norwalk Orange County Rossmoor San Pedro Seal Beach Signal Hill South Bay Westminster

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