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1031 Exchange

How To Get A Capital Gains Tax Break

WHAT IS A 1031 EXCHANGE?

Named after section 1031 of the U.S. Internal Revenue Code, a 1031 exchange allows you to defer capital gains taxes by reinvesting the proceeds from the sale of a business or investment property into a similar property. It's often called a "like-kind" exchange—but don't worry, it’s not as confusing as it sounds.

What Qualifies as Like-Kind?

1031 exchanges are generally for business or investment properties—not personal-use like your home or vacation house.

Stocks, bonds, partnership interests, and similar financial instruments also don’t qualify.

HOW DOES A 1031 EXCHANGE WORK?

Pulling off a 1031 exchange requires following a specific set of rules and deadlines, so having a trusted team of experts is key. Here’s a quick breakdown of the process:

1. CHOOSE AN INCOME PROPERTY OR BUSINESS YOU OWN FOR THE EXCHANGE 5. ANOTHER IMPORTANT DEADLINE = 180 DAYS TO CLOSE ESCROW ON THE REPLACEMENT PROPERTY 2. WORK WITH A QUALIFIED INTERMIDIARY (QI) 6. DON'T TOUCH THE CASH OF YOUR HANDS! TOUCH IT AND RISK DISQUALIFYING 3. FIND A LIKE-KIND PROPERTY WITHIN 45 DAYS + GIVE YOUR QI THE DETAILS 7. FILE THE RIGHT FORMS = IRS FORM 8824 (Link below) 4. REMEMBER, ONLY THE GAINS EXCHANGED TO THE NEW VENTURE ARE TAX DEFERRED

LINK TO IRS FORM HERE

Other 1031 Rules You Need to Know

The Fine Print:

Taxes Aren’t Gone Forever: A 1031 exchange defers your tax bill; it doesn’t eliminate it. That said, if the property passes to heirs, they might avoid taxes altogether with a stepped-up cost basis.
Flexibility with "Like-Kind": You don’t need to swap an apartment building for another apartment building. You could exchange vacant land for a commercial space, for example.
Qualified Intermediary Restrictions: Your intermediary can’t be a relative, your attorney, or your real estate agent. Keep it professional (and neutral).

Types of 1031 Exchanges

SINGLE FAMILY INCOME

The IRS has a minimum length of time the home must have been used as an income property (typically 2 years or more).

A Business

Any kind of business! Brick and mortar, virtual or a combo of the two!

MULTI FAMILY INCOME

4 units or less is still considered residential. 5 units or more is commercial and BOTH can be exchanged for either. Or...

Avoiding Scams

Yes, 1031 exchanges are legit, but that doesn’t mean everyone pitching them has good intentions. If someone tells you to exchange a vacation home or claims it’s a tax-free deal, run the other way—it’s likely a scam.

WHY THIS ROCKS

A successful 1031 exchange can bring you some serious perks. Think deferring capital gains taxes, opening doors for bigger investments, and supercharging your real estate portfolio.

1

When you ace a 1031 exchange, you're pressing pause on those capital gains taxes. That's more of your money staying put – just where it should be.

2

With taxes out of the picture, your financial muscles flex a bit more. Picture the chunk you'd have handed over to taxes now fueling your next big investment move.

3

Your real estate portfolio? It's getting a major upgrade. Swapping properties strategically is like giving it a turbo boost.

COMPLIMENTARY 1031 EXCHANGE CONSULTATION

ARE YOU READY?

My team and I have partnered with some of the best pros in the business to ensure that your 1031 Exchange goes smoothly. Click here to set up a complimentary consultation to see how easy we can make this for you.

Let's Connect

Contact Details

Kelly Corsino | CA DRE #02022092

Phone

(949) 229-0019

[email protected]

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