1031 Exchange Services in Florida

A 1031 exchange is an Internal Revenue Service (IRS) tax rule that benefits real estate investors by allowing them to exchange one investment property for another or to sell the property without paying capital gains taxes on the proceeds.

At 1031 Federal Exchange, our team of seasoned professionals represents clients nationwide, including Florida. Our services include consulting, exchange management, and tax compliance, opinions, and strategies. We are committed to helping clients diversify and enhance their real estate holdings and portfolios.

What Are the Benefits of a 1031 Exchange?

The key advantages of a 1031 exchange are the flexibility to defer capital gains taxes on the property you are acquiring and the opportunity to expand your portfolio of investment properties. This strategy allows you to exchange one property for multiple or vice versa, tailoring your real estate investments to suit your specific goals.

Additionally, utilizing 1031 exchanges to manage investment properties allows you to choose when to sell your property and acquire another, increasing equity as the properties appreciate.

What Are the Regulations for 1031 Exchanges?

You must meet IRS requirements for the exchange to be eligible:

The property must be for investment purposes and considered like-kind by the IRS.
The acquired property’s market value must be equal to or greater than the property you sold.
You must not receive cash, property improvements, or debt relief as additional value.
All proceeds from the sale of your property must be reinvested in the replacement property.
The purchase or sale cannot involve the property of family members or those with whom you have personal or close relationships.

When Should I Do a 1031 Exchange?

The primary reasons for using a 1031 exchange are to defer capital gains tax and increase wealth. However, there are other beneficial reasons for utilizing a 1031 exchange, such as:

Investing in a property with better returns than your current property, such as appreciation or rental income.
Exchanging a property you manage for one with managed units.
Consolidating multiple properties into one for simplifying assets or estate planning purposes.
Selling one property in exchange for various units to diversify your real estate portfolio or to take advantage of numerous markets.
Converting your vacation home to a rental property.
Resetting the depreciation on your property.

What Are the Property Requirements for a 1031 Exchange?

Any business or investment property can be exchanged, provided it is like-kind. The IRS has a broad definition of like-kind, which refers to the nature of the investment property rather than its form, such as exchanging a single-family rental for a multi-family apartment building or a vacant lot for a commercial building.

The properties must all be of equal or greater value and generally require a two-year minimum ownership. You have three options to reap the full benefits of a 1031 exchange, as follows:

Identify three potential purchase properties regardless of market value.
Choose unlimited replacement properties with a total value of less than 200 percent of your sold property’s value.
Purchase unlimited replacement properties in which you pay 95 percent or more of their total value.

What Properties Are Not Eligible for a 1031 Exchange?

You cannot trade partnership shares, notes, stocks, bonds, certificates of trust, properties in foreign countries, personal property, or stock in trade, such as buying a property to flip and sell immediately following renovations. A 1031 exchange may be denied if you attempt to sell the property soon after acquiring it or exchange multiple properties in one year.

To qualify, you must also show that the property was purchased strictly for investment through proof of your purpose and motivation behind the purchase, the length of time the property was held, and your business for owning the property.

What Does the Process of a 1031 Exchange Entail?

Through 1031 exchanges, the federal government encourages real estate investors to take advantage of the associated tax breaks. The exchanges promote employment, increase the national economy, and contribute to federal, state, and local tax revenue. While tax laws can be complicated, the 1031 exchange process is fairly straightforward and involves the following steps:

Identifying the investment property you want to sell, which must have increased in market value since you acquired it.
Hiring a mandatory qualified intermediary (QI) to hold all funds from the sale of your property and distribute them to the owner of the property you purchase. Our 1031 Florida QIs are ready to assist.
Identifying up to three replacement properties within 45 days from the sale date of your property, regardless of total value.
Purchasing the identified replacement property within 180 days from the sale date of your property.
Filing IRS Tax Form 8824 detailing the exchange with your tax return.

What Does a 1031 Federal Exchange QI Do?

As experienced lawyers, we thoroughly understand real estate and tax law. As required by the IRS, we have handled numerous exchanges for all types of property investors in our QI role. When you work with our QIs, we will perform the following:

Counsel you regarding the structure of 1031 exchanges.
Prepare all property sale and replacement purchase documents.
Instruct the title or escrow company regarding the exchange and provide appropriate documentation.
Establish an arm’s length transaction within the seller and QI agreement.
Deposit funds from the sale of your property and hold them for the 45-day identification period.
Manage records on potential replacement properties.
Oversee the purchase of the replacement property and transfer funds to the title or escrow company.
Convey the property title to the seller or exchanger by deed.
Maintain complete and accurate records of the full exchange.
Generate 1099 tax forms for the IRS, if needed.

Whatever your investment, 1031 Federal Exchange will provide sound legal guidance to help you expand your real estate investment portfolio.

1031 Federal Exchange Assists Florida Clients With Real Estate Investments and Portfolio Building

Our QIs at 1031 Federal Exchange are savvy professionals and help Florida real estate investors defer capital gains taxes, enhance their portfolios, and increase their financial standing. Call today at 513-488-1135 or contact us online to schedule a free consultation. Located in Loveland, Ohio, we serve clients nationwide.