Exchanges performed according to IRC Section 1031 regulations enable investors to defer capital gains taxes on their investments. JELD-WEN 1031 treats each exchange as a specialized transaction because each investor's situation is unique.
JELD-WEN 1031 professionals examine, in depth, the conditions and requirements around each exchange, then customize a solution that enables the investor to achieve maximum benefit from the exchange.
Conditions for Tax Deferral
A 1031 exchange may be tax-deferred by meeting these conditions:*- The replacement property is equal or greater in value than the relinquished property
- The exchanger's debt on the replacement property is equal or greater than the debt on the relinquished property (debt can be offset by additional cash from the exchanger)
- All proceeds from relinquished property are used to purchase the replacement property
*Failure to meet one of the above conditions does not negate the exchange transaction, but it may result in some tax consequence.
Types of Exchanges
Learn about different types of 1031 exchanges:
Simultaneous Exchange
A simultaneous exchange is an exchange of property between two parties and requires closing both the relinquished and the replacement property on the same day.
Delayed Exchange
Delayed exchanges are for investors who dispose of relinquished property while reserving the right to exchange for a replacement property.
Reverse Exchange
Use a reverse exchange when the replacement property is acquired before selling the relinquished property.
Improvement Exchange
An improvement exchange is used when an exchanger uses all or part of the 180-day 1031 exchange period for the purpose of having improvements made to the property which will be acquired as the replacement property by the end of the exchange period.
Personal Property Exchange
Investment property may be exchanged under Section 1031 regulations, provided it is exchanged for property in the same asset class, as defined by the North American Industry Classification System (NCAIS).
New regulations stipulated in 2002 have made 1031 exchanges involving the purchase of property from a relative less flexible. It is especially limited for like-kind exchanges transactions already subject to restrictions.
Further Exchange Information
Because each exchange has its own parameters, most require a customized solution. JELD-WEN 1031 offers investors a step-by-step guide for the exchange transaction.
To comply with IRC Section 1031 exchange requirements, investors must meet two essential deadlines. First is a 45-day deadline identifying potential replacement properties; next is the 180-day deadline to acquire the replacement properties and complete the exchange.
If a seller agrees to carry a note on a sale of property, the IRS considers this taxable. There is a viable alternative to paying this tax: the note can be part of an exchange where the note is made payable to JELD-WEN 1031.
Some types of investment properties require additional qualification measures, a different type of exchange structure, or extra documentation in order to be used in a Section 1031 exchange. Learn more about flipped properties, mixed use properties, 5-year holds and vacation homes.