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1031 Exchange

Vail Valley 1031s

There are many opportunities for 1031 Exchange transactions here in Vail. I have extensive experience assisting 1031 Exchange clients and would welcome the opportunity to assist you with your sale and/or purchase.

Tax Deferred Real Estate Exchange

This page is intended to provide useful information about tax deferred exchanges of real estate held for investment. There are considerations of time and property value, so check with your tax advisor.

What is a 1031 Exchange?

A 1031 Exchange is tax deferred exchange of investment property. The sale of some currently owned investment property is matched, or exceeded, in value by the purchase of similar investment property within IRS time and value guidelines. In the realm of real estate, the "exchange" means that the sale of one piece of investment property will be matched with the purchase of another "like" piece of investment property within the prescribed time period without any capital gains and therefore the individual will "defer" taxes.

Is This A Good Idea?

In most cases it is a great idea because if offers real estate investors one of the last great investment opportunities to build wealth and defer taxes. By using the 1031 Exchange, the investor can sell their current investment property and use all the proceeds to purchase the replacement investment property. Capital gains taxes, taxes on the recapture of depreciation and state taxes are deferred and the investor leverages all of their equity into the replacement property. Whether it is a good idea for you should be determined only after a review with your tax advisor.

What are the requirements?

There are several basic requirements that must be met to defer the capital gains tax: You must acquire like-kind replacement property (the new purchase must be of equal or greater value) and You must reinvest all net equity (you cannot receive cash or other benefits from the sale of the original property, all proceeds must go towards the new investment) and You must work through a Qualified Intermediary who will also provide valuable guidance. To quote the tax code: "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 a like-kind which is to be held for either productive use in trade or business or for investment purposes". You have 45 days from the closing of the old property to identify up to three (3) replacement property candidates. You have 180 days from the closing of the old property to close on replacement property.

Who Should Use This Tax Deferring Vehicle?

Anyone who is considering the sale of one piece of investment property and the purchase of another.

What Are Examples of Qualifying Property?

In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment or for productive use in your trade or business. Selling a rental property and buying another rental property at a higher sales price qualifies.

What Are Examples of Non-Qualifying Property?

  • Property you use for personal purposes, such as your home and your family car.
  • Stock in trade or other property held primarily for sale, such as inventories, raw materials and real estate held by dealers.
  • Stocks, bonds, notes or other securities or evidences of indebtedness, such as accounts receivable.
  • Partnership interests.
  • Certificates of truct or beneficial interest.
  • Choses in action.

Will The 1031 Exchange Apply To Investment Property In Vail/Beaver Creek?

If you are selling rental property somewhere and want to purchase property in a resort community and use it as rental property, this is considered a like-kind exchange. You can review the trend in property values for the recent past in the Vail Valley by checking out my Market Reports at this website.

References and Resources

Again

There are considerations of time and property value, so check with your tax advisor.

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