1031 Exchange Fundamentals

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By: Dwight Kay, Founder – Kay Properties and Investments, LLC

What is a 1031 Exchange?

The 1031 exchange is thought by many to be one of the more powerful tax deferral tools currently available to taxpayers. Under the Internal Revenue Code Section 1031 taxpayers can defer their capital gains tax on the sale of property if they reinvest the proceeds in like-kind property.

IRC Section 1031 provides that “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment purposes if such property is exchanged solely for property of like-kind, which is to be held for productive use in trade or business or for investment purposes.”
What qualifies as “like-kind” property?

Any property that is held for business or investment will generally qualify as “like kind”.

Examples include:

  • Apartment buildings
  • Delaware Statutory Trust properties
  • Duplexes and Triplexes
  • Single-Family Rentals
  • Vacant land
  • Farm Land
  • Office Buildings
  • Warehouses
  • Self storage Facilities
  • Hotels and Motels

What are the basic requirements to discuss with my CPA and Attorney regarding a 1031 exchange?

  • Utilize a Qualified Intermediary (QI) to hold your exchange proceeds.
  • Identify your replacement properties with your Qualified Intermediary within 45 days of the sale of your relinquished property.
  • Reinvest 100% of your net sales proceeds into the replacement properties.
  • Acquire an equal or greater amount of debt on the replacement properties as you had on your relinquished property.
  • Close on your replacement properties within 180 calendar days of the sale of your relinquished property.

Risks & Disclosures

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). All offerings are subject to availability. There can be no assurance that any offering shown will be available for investment. All offerings are subject to availability. There can be no assurance that any offering shown will be available for investment. All offerings are subject to availability. There can be no assurance that any offering shown will be available for investment. Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, WealthForge Securities, LLC and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of WealthForge Securities, LLC, Member FINRA / SIPC. Kay Properties and Investments, LLC and WealthForge Securities, LLC are separate entities. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

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