Section 1031 Exchange Irs

1031 states the recognition rules for realized gains or losses that arise as a result of an exchange of like kind property held for productive use in trade or business or for investment.

Section 1031 exchange irs. In real estate a 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. Under the tax cuts and jobs act section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property. The section 1031 like kind exchange rule provides that the gain or loss should not be recognized to the extent that property held for productive use in the taxpayer s trade or business or held for investment purposes if such property is exchanged for property of a like kind that also is held for productive use in a trade or business or for investment.

If as part of the exchange you also receive other not like kind property or money you must recognize a gain to the extent of the other property and money received. Only nevada licenses qis. No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

Irc section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like kind exchange. The term which gets its name from irs code section 1031 is bandied. Section 1031 a of the internal revenue code 26 u s c.

An exchange of real property held primarily for sale still does not qualify as a like kind exchange. Types of irs section 1031 exchanges and the role of a qualified intermediary with a few exceptions 1031 exchanges require the involvement of a q ualified intermediary qi also called an a ccommodator.