1031 Exchange Fundamentals

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.

About Kay Properties and www.kpi1031.com 

Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market.  Kay Properties team members collectively have over 115 years of real estate experience, are licensed in all 50 states, and have participated in over 15 Billion of DST 1031 investments.

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”). Please read the entire Memorandum paying special attention to the risk section prior investing.  IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation.  There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. If you are not the intended recipient of this message, any use, dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately notify the sender and permanently delete all copies that you may have. Securities offered through Growth Capital Services, member FINRASIPC, Office of Supervisory Jurisdiction located at 582 Market Street, Suite 300, San Francisco, CA 94104.

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