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Articles  >>  1031 Exchange - Is It For YOU ?

1031 Exchange - Is It For YOU ?


Yes, if you have a real property that will get you a profit on sale (may be due to property value depreciating for tax purposes or due to appreciation of real estate in fair market value) then you are the ideal person to go in for a 1031 real estate exchange. Section 1031 of the IRC applies to “Property used in taxpayer's trade or business”, “Property held for investment” and also potentially for “Property used as a vacation home.” In normal circumstances, the exchange can take the form of a direct interchange or the taxpayer may take assistance from a Qualified Intermediary to hold the sale proceeds until the taxpayer directs the Qualified Intermediary to use them to acquire like-kind replacement property. Completing a qualified exchange keeps you in the real estate business and may preserve your capital gains as far as the IRS is concerned.

Under Internal Revenue Code Section 1031, generally no gain or loss is recognized when you exchange business or investment property exclusively for business or investment property of a like-kind. In a like-kind exchange, properties are believed to be of a like-kind if the property acquired is alike in nature and situated in the United States. However, real property in the United States and real property outside the United States are not considered as like-kind properties. Some common examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes. Although Section 1031 is not applicable to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or on certain other assets.


For more information about 1031 Exchanges, please click on the link below.



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