The name 1031 Exchange arises from Section 1031 of Internal Revenue Code

Real estate transactions involve many rules, and one of them is the 1031 Exchange. In a 1031 Exchange, a transaction takes place between a property owner trading a property for replacement property of the ‘like kind’. This name arises from the fact that this transaction is realized under the rules of Section 1031 of the Internal Revenue Code. Section 1031 states that no gain or loss shall be recognized for tax purposes on the exchange of property held for productive use in a trade or business or for investment.

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1031 Exchange properties provide interest free money

A 1031 exchange proves to be beneficial to the property owner as he can defer or eliminate any potential tax like Federal, capital gain and depreciation recapture taxes, associated with the sale of real property. With this deferring of taxes, the owner is left with more money. This money is interest free and can be used for investment purposes wherein a more expensive property will be affordable.

Properties need not be traded in a 1031 Exchange

All real properties in United States are of like-kind and have no connection on whether the property is improved or unimproved. However, real property outside of the United States cannot be considered to be like-kind property to the real property in United States. It is not necessary to actually trade properties in a 1031 exchange. The proceeds can go to a ‘qualified intermediary’ who is a person or entity that holds these funds in escrow till a replacement property is ready to be purchased. These funds can be held in escrow for 180 days or till the due date of the tax return the property was relinquished.

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Commercial Dex has a large database of 1031 exchange property

People in search of 1031 exchange property or those having funds in escrow should pay a visit to Commercial Dex. You will be provided with huge databases of various like-kind 1031 exchange properties from which you can make your choice, and your 1031 exchange.