1031 Like-Kind Exchanges: Rules, Timelines & Pitfalls
How investors defer capital gains by rolling proceeds into a replacement property.
What is a 1031 like-kind exchange?
A 1031 exchange, named for the section of the tax code, lets a real estate investor sell an investment property and defer the capital gains tax by reinvesting the proceeds into another "like-kind" investment property. Done correctly, it lets an investor keep more capital working instead of paying tax on the sale.
The strict timelines
The deadlines are unforgiving. From the sale of the relinquished property, an investor generally has 45 days to identify potential replacement properties and 180 days to close on the replacement. The proceeds usually must be held by a qualified intermediary — the seller cannot touch the money — or the exchange fails.
Common pitfalls
Missed deadlines, taking control of the funds, identifying the wrong property, or a mismatch in value or debt can all disqualify the exchange and trigger the tax. Because the rules are technical and the tax stakes high, a 1031 exchange should be planned with legal and tax advisors before the sale closes.
How Nochumson P.C. helps
Nochumson P.C. handles the legal side of 1031 exchanges and coordinates with your intermediary and tax advisor. Contact us before you sell.
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- Right of Redemption After a Tax or Sheriff Sale (PA)
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