About 1031 Exchanges

About 1031 exchangesThey allow investors to defer the tax on capital gains on investment property. A property owner trades one or more relinquished properties for one or more replacement properties of "like kind," while deferring the payment of federal income taxes and some state taxes on the transaction.
They are called 1031 exchanges after the section of the Internal Revenue Service code that allows them.
There is no federal oversight, certification or regulation of 1031 exchange companies. A handful of states have laws regarding them, but not Virginia.
Here's how a 1031 exchange works: The owner sells the investment property. The seller has 45 days after the sale to identify up to three potential new properties to buy with the money from the property sale. The investor must buy one or more of the identified properties by the 180th day after closing of the old property in order to qualify. The investor must buy a property that is equal or greater in value than what was sold.
For it to qualify as a 1031 exchange, the IRS requires that the third party, or "qualified intermediary," hold the proceeds from the sale so that the owner never takes receipt of the money.
SOURCE: Federation of Exchange Accommodators