How Exchanges Are Used Today
It's a great way for an investor to build wealth and defer taxes that would otherwise be due on a straight sale. Through a Qualified Intermediary, you can sell your real estate to one person and buy your Replacement Property from another person. You do not have to “swap” properties with someone to do a tax-deferred exchange.
The tax deferred exchange procedure is outlined under the Internal Revenue Code Section 1031, and involves a series of rules and regulations that must be met in order to take full advantage of this great tax benefit.
The Internal Revenue Code states that neither gain nor loss is recognized if a property held for investment is exchanged for “Like-Kind” property.
The taxpayer may avoid the taxable sale and purchase and qualify for Exchange treatment if, prior to the sale of the Relinquished Property, the taxpayer enters into an Exchange Agreement with a "Qualified Intermediary", who structures the exchange transactions properly to meet all of the requirements of the Code and the Regulations. |
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