Author Topic: 1031 Exchange?  (Read 1131 times)

flyersman

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1031 Exchange?
« on: May 17, 2017, 12:50:06 PM »
I was in a meeting today and someone was talking about buying a house from a seller. He mentioned asking the seller if he knew what a 1031 Exchange was. The seller did not so he bought it full asking price.

Can anyone explain?
« Last Edit: May 18, 2017, 08:23:16 AM by flyersman »

jwright

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Re: 1035 Exchange?
« Reply #1 on: May 17, 2017, 02:36:11 PM »
Did he mean a 1031 exchange? 

I don't know much about 1035 exchanges, but that's when you transfer life insurance from one policy to another without triggering tax.

CowboyAndIndian

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Re: 1035 Exchange?
« Reply #2 on: May 17, 2017, 03:13:55 PM »
A 1031 exchange is done when you sell a business and buy a replacement business.

So, if you own a rental property  and you sell that and buy another rental property, you can use a 1031 exchange.
There are some requirements for the 1031 exchange
  • You use a Qualified Intermediary (QI)
  • Money from the sale goes to the QI, you do not touch it.
  • You identify the replacement property within 45 days of sale
  • You complete the purchase of the new property within 180 days of the sale

I'm not a CPA/tax person. The above explanation is very simplistic.

I just finished a 1031 exchange (https://forum.mrmoneymustache.com/real-estate-and-landlording/questionsadvice-about-rentals-gt-1031-exchange-gt-rental-gt-primary-residence/msg510801/#msg510801)


flyersman

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Re: 1035 Exchange?
« Reply #3 on: May 18, 2017, 08:23:08 AM »
Did he mean a 1031 exchange? 

I don't know much about 1035 exchanges, but that's when you transfer life insurance from one policy to another without triggering tax.

Yes. I updated. Thanks for clarification

CareCPA

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Re: 1031 Exchange?
« Reply #4 on: May 18, 2017, 08:31:34 AM »
Now that we've clarified it's 1031 and not 1035:
The quick and dirty is that a 1031 exchange allows you to defer the gain on sale and roll that into the basis of the new property.

As CowboyAndIndian stated, there are some hoops to jump through.