FAQs About 1031 Exchange Property

Believe it or not, properties that are used for investment, trade or business can be exchanged for like kind property. The nature of investment rather than the form is what does like-kind means. Any type of investment property could be exchanged for different kind of investment property. You may not believe it, but a single family residence may be traded for a raw land, duplex for an office for shopping center or office for apartments. Basically, any combination can work and the exchanger has flexibility to change their investment strategies in an effort to fulfill their needs.

However, you have to know that you can’t trade notes, stocks, certificates of trust, bonds or partnership shares or any other similar items. It is impossible either to trade investment property for property in foreign land, personal residence or stock in trade. Houses that are made by a developer and offered for sale are stock in trades.

To help you have a better understanding of 1031 exchange property, let’s check out some FAQs regarding the said subject.

Question number 1. What doesn’t qualify for 1031 exchange – any properties held for productive use in business, trade or investment is qualified for a 1031 exchange. Tax code specifically excluded properties even if it’s used in business or trade or for investment.

Usually, a primary residence doesn’t qualify for exchange as it isn’t used in business, trade or investment. And with that in mind, that particular portion of primary residence that is used for business, trade or investment can qualify for 1031 exchange.

Question number 2. How to get started in 1031 exchange – getting started with exchange is as basic as calling your exchange facilitator. It’ll be a big help to have the info about the parties to transaction at hand such as names, phone numbers, addresses, file numbers and so forth before making the call. The exchange coordinator will be asking questions about the property being relinquished and any replacement property proposed during the phone call.

Initial discussion will dramatically vary from one company to the other with regards to the amount of requested detail. There is little actual information required to structure a basic delayed exchange.

Question number 3. How to choose a facilitator – when preparing for an exchange, call an exchange facilitation firm. You can get the names of facilitators from various sources like lawyers, escrow companies, real estate agents, CPAs and from the internet. It’s also your job to ask questions with regards to the procedures applied as well as the assistance that they can offer if ever a problem took place.

Citation: see page