An Overview of the 1031 Exchange

US dollars

A 1031 exchange is a great way to defer taxes and leverage any of your investments to establish your holdings. In other words, it’s a way to swap your investment assets or business for a different one. Although most exchanges are considered as sales that are taxable, these kinds of swaps won’t have any tax. However, the process can be quite tedious. Fortunately, you can work with a land exchange company like 1031 Exchange Place to get the best assistance.

Here are some facts about the 1031 exchange that you should know:

1031 Isn’t for Personal Use

The provision is only limited to both business and investment properties. Thus, the idea of swapping your primary residence is not possible. However, the most common 1031 exchanges come from the real estate industry. According to Forbes, interests as a tenant in common are qualified.

You Can Reform an Investment Property

You may use a 1031 exchange to purchase an investment property and then convert it for personal use. Let’s say you buy an investment property. You may rent it for at least two years and then move in afterward. You may convert the use over time and even gain the residential tax cut once you decide to put it on the market.

You Can Do a Delayed Exchange

Traditionally, a 1031 exchange requires two people and properties. However, the chances of locating someone with the same property can be a challenge. That’s why most transactions are often delayed. When this occurs, you might want to hire the services of an intermediary to keep the cash after you sell the real estate property and use it to purchase the replacement real estate property.

These are just some of the facts that you might want to know about the 1031 exchange. It’s always best to conduct thorough research or work with someone who knows a lot about the replacement property process.