About the1031 Exchange
A 1031 Exchange is all about reducing the amount of Capital Gain tax you may
pay in selling one piece of property and buying another. Through Section 1031
of the Internal Revenue Code a taxpayer can defer the capital gains tax which
is normally due on the sale of a property by exchanging for another “like
There are certain rules and regulations which closely monitor the 1031 Exchange.
To properly defer the tax liability, you (the taxpayer) will never be in direct
receipt of the funds from the sale of your property, thus you will never actually
receive the capital gain. You must have a third party involved who is qualified
to be the accommodator. This accommodator will hold the proceeds of the sales
during the exchange period. EMI Title will act as your accommodator and prepare
all necessary documents as well as coordinate your transaction with your closing
agent. Your proceeds will be maintained in an interest-bearing account during
the exchange period in a manner which meets all regulations.
The following types of properties are not eligible for a 1031 Exchange
- Your primary residence
- foreign real property
- vacation homes
- partnership interests.
||You have a maximum of 45 days to formally identify the replacement
property after the sale of your existing property. The 45 days begins on
date of transfer of existing property.
||You then have either 180 from that transfer date, or your next tax filing
deadline (including extensions) to complete the exchange.
Use of Proceeds
The accommodator can advance funds from your interest-bearing account for:
- earnest money deposits
- appraisal costs
- or repairs to the replacement property.
- It may also be possible to use the funds to construct a replacement property,
but these transactions are more complex and require careful structuring and