1031 Tax Deferred Exchange Part 1 of 2 by Joe Szabo, Scottsdale Real Estate Team

By Joe Szabo, Scottsdale Real Estate Team

Starker 1031 tax-deferred exchanges are the best known and most common tax-deferral tool for real estate: it’s an exchange of property and tax deferral under the provisions of IRS Code section 1031. A 1031 exchange allows the complete and indefinite deferral of capital gains taxes and recapture of depreciation, allowing taxpayers to do the following:

Trade up to larger investment properties.

Relocate real estate investments.

Change the type or character of real estate investments.

Diversify or consolidate real estate investments to or from multiple properties.

Trade nonproductive property for real estate investments that produce income.

The 1031 exchanges sprang from a 1979 court decision that allowed property owners to sell one property and wait up to six months to buy another without losing the right to consider the transaction an exchange for tax-deferral purposes. That case opened up a whole new profession in the real estate industry: the qualified intermediary or accommodator. Their job is to facilitate and document 1031 exchanges by receiving the proceeds of a sale under the terms of an exchange agreement and then applying those funds at the direction of the exchanger for the acquisition of the replacement property.

1031 exchanges usually happen with little effort on the part of the buyer and seller. Instead, the qualified intermediary or accommodator handles the paperwork and then sends it to escrow/title companies or closing agents to the buyer and seller of each property for signatures.

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent or Real Estate Attorney . The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area.  Award winning Realtors and Re/MAX top producers, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Listings.