1031 Exchange Phoenix Arizona | Investment Property Exchange
Due to the broad definition of “like-kind” for real property exchanges, these types of exchanges are generally one of the most common. In general, any type of U.S. real property interest held for productive use in a trade or business, or for investment purposes can be exchanged for another real property interest regardless of its grade or quality and as long as the property to be exchanged is considered real property under the state law in which the property is located. For most real property exchanges the taxable gain is due to a combination of the appreciation in value and the amount of depreciation taken over the period of time that it was owned. The following are examples of real property interests that are deemed to be of “like-kind” and that can be exchanged: vacant land, agricultural land, office buildings, industrial buildings, retail buildings, apartment buildings, multifamily rentals, single family rentals, 30 year ground leases, undivided fractional interests, mineral rights, oil fields, air rights and development rights.
Example: An investor exchanges a single family rental home valued at $1,650,000 with no debt in California for a $2,000,000 apartment building in Arizona for a tax savings of over $238,000 that can be used to purchase substantially more replacement property.
|Single Family Rental||$1,650,000||$1,650,000|
|Tax Deferred Savings||$0||$238,000|
|Cash Available For Reinvestment||$1,412,000||$1,650,000|
1031 Exchange Rules To Meet IRS Regulations
Real Property Use – Both your old and new properties must qualify as investment or business use. If both properties pass this test, you can exchange nearly any type of real estate.
45-Day Identification Period – You have 45 calendar days from the closing date of your sale to list the properties you may want to buy as a replacement property. There are zero exceptions to this deadline.
180-Day Exchange Period – From the sale closing date, you have 180 calendar days to close on the purchase of one or more properties from the 45-day list. There are zero exceptions to this deadline.
Qualified Intermediary (QI) – The IRS mandates that you use a qualified intermediary or QI to prepare the legal documents for your exchange. The IRS requires that the QI be an independent third party, which means that you cannot use a friend, relative, employee, broker, your accountant or attorney. The QI also holds your money in a separate account so that you do not have access to it.
Proper Title Holding – You must take title to your new property exactly as you held title to your old property.
Reinvestment Requirement – To defer all of your capital gain tax, you must buy a property of equal or greater value than the property you sold. Also, you must reinvest all of the cash proceeds from your sale.
1031 Exchange Rule Changes
The regulations, court cases and IRS rulings that may affect your 1031 exchange are ever-changing. It is important to choose a Qualified Intermediary (QI) that understands these laws and carefully monitors new legal developments.
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About Vestis Group
Vestis Group is the broker of choice for individuals and institutions investing in multifamily, residential and commercial real estate throughout Metropolitan Phoenix. Our advisors assist clients in the acquisition and disposition of multifamily investment and retail investment assets, including, apartments, bulk condo packages, duplex/triplex/fourplex properties, single-family rental portfolios (SFR Portfolios), income producing single-family investment properties, neighborhood strip centers, retail power centers, retail strip centers, neighborhood grocery, retail PAD and retail shopping centers. In the field of housing, Vestis Group’s principals have developed, built, rehabilitated, constructed, improved, managed, and sold thousands of apartments units, condos, single-family homes and home sites.
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