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 typically 20-40 DSTs from over 25 different DST sponsor companies, custom DSTs only available to Kay clients and a DST secondary market. Kay Properties team members collectively have over 400 years of real estate experience, are licensed in all 50 states, and have participated in over 30 Billion of DST 1031 investments.

Diversification does not guarantee profits or protect against losses. All real estate investments provide no guarantees for cash flow, distributions or appreciation as well as could result in a full loss of invested principal. Please read the entire Private Placement Memorandum (PPM) prior to making an investment. This case study may not be representative of the outcome of past or future offerings. Please speak with your attorney and CPA before considering an investment.

There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential distributions, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals, and risk tolerances. Securities offered through FNEX Capital, member FINRASIPC.