IPX1031 Insight Blog Locations CONTACT US START AN EXCHANGE TODAY Home Tax Reform About Us 1031 Services Resources Coronavirus 1031 Exchange FAQs 1031 FAQs What is Internal Revenue Code Section 1031? Since 1921, Federal tax law under Internal Revenue Code (IRC) section 1031 has permitted a taxpayer to exchange business-use or investment assets for other like-kind business use or investment assets without recognizing taxable gain on the sale of the old assets. The taxes, which otherwise would have been due from the sale, are thus deferred. Most 1031 Exchanges involve separate buyers and sellers and are not simple swaps between two parties. Under these circumstances, the use of an independent third party Qualified Intermediary (QI) is necessary to satisfy the “exchange” requirement. The QI holds the sale proceeds for the benefit of the taxpayer during the exchange, disbursing funds for purchase of like-kind replacement property, and returning any unused funds to the taxpayer at the end of the exchange. 1031 Exchanges must be completed within 180 days. Taxpayers recognize gain and pay tax on any unused funds or when they ultimately “cash out” of their property. In 2018, section 1031 was amended to provide that only real estate is eligible for a 1031 Exchange. What are 1031 Like-Kind Exchanges? Who uses 1031 Exchanges? What are the benefits of 1031 Like-Kind Exchanges? Does the tax ever go away? What are the tax policies upon which 1031 Exchanges are based? Avoiding Boot Having nothing at all to do with footwear, “Boot” is a term that refers to the items of personal property and/or cash that are necessary to even out an exchange. Boot is property that is received in an exchange but is not “like-kind” as to other property acquired in an exchange transaction. Boot is defined as the “fair market value” of the non-qualified property received in an exchange. Read more…. The Role of the Qualified Intermediary Safety & Security for Exchangers What is a Reverse 1031 Exchange? Vesting Issues Partnership Issues Qualified “Like-Kind” Property The Tax Deferred Exchange Planning Ahead for a Successful Exchange Section 1031 and the Economy How do 1031 Like-Kind Exchanges stimulate the economy? Like-kind exchanges contribute to the velocity of the economy and promote job growth within the United States. §1031 stimulates the economy by encouraging real estate transactions. Transactional activity results in taxable income, job growth, manufacturing, financial services, construction, improved neighborhoods and tax revenue to states and local communities. Ultimately, this economic stimulus spills over to create jobs in factories, restaurants, recreational, hospitality, tourism and other local small businesses that generate revenue from the after tax dollars of employed workers. How can 1031 Exchanges benefit businesses, and ranchers and farmers? How can like kind exchanges be used for conservation and environmental policies? How does depreciation impact exchanges to make section 1031 revenue neutral? Accessibility Privacy Policy California Privacy Terms of Use Contact Us Locations Resources ©2021 Investment Property Exchange Services, Inc. | All Rights Reserved.