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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 kind” property.

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
  • securities
  • inventory
  • vacation homes
  • partnership interests.

Time:

45 Days 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.
180 Days 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 coordination.

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