When you sell real estate typically you must pay taxes on the gain from the sale of the property. The gain is caused by either the property appreciating over time or by taking depreciation deductions for tax purposes. Section 1031 of the Internal Revenue Code allows you to defer paying standard real estate taxes on this gain.

To help you make the most of your 1031 Exchange you are invited to utilize Re/MAX Central specialized well educated agents who specialize in these types of sophisticated transactions. As in any other professional field such as law, medicine and architecture, highly trained specialists like our real estate agents can add tangible value to these types of transactions as opposed to general real estate agents.

We provide our clients and their advisors superior and comprehensive 1031 Exchange real estate services. We tailor each transaction to meet your needs, while helping you to understand and comply with all reporting and regulatory requirements. Meeting your 1031 real estate objectives is our highest priority and we have extensive experience in providing like kind exchange services to corporate, institutional, and individual taxpayers.

Overview of a 1031 Exchange
A 1031 is by no means considered a tax loophole – it is a code section written by the United States Congress to allow anyone who meets its requirements to sell their property and defer paying any taxes on the actual gain.

As a hypothetical example, the investor (exchanger) must have a like kind investment property for the exchange; i.e. investment rental property for another investment rental property or investment vacant lot for investment vacant lot (similar transaction).

The exchanger should purchase a property for a higher basis than the selling property to get the best results possible. The exchanger as purchase can leverage their investment by financing and receiving cash at settlement and gaining additional tax incentives.

Re/MAX Central works closely with several top tier law firms in the Las Vegas area – you will want to avail yourself of their services as part of the transaction to have them complete the legal documents that are required by the IRS to qualify for a 1031 Exchange.

The Qualified Intermediary
The Qualified Intermediary is the third party who temporarily holds the funds and property during the exchange period typically in an escrow account – this firm affects the three way trade or change of properties and funds and handles all necessary paperwork to facilitate the process. You cannot receive or hold the cash from the sale of the relinquished property. The Intermediary must hold the funds until the replacement property is identified and the transaction is completed in the allotted 180 day period (see below for details on timeline).

What is the Like Kind Requirement?
For a real estate transaction, like kind refers not in the actual nature or quality of the property itself but to the underlying definition of real estate under Nevada state law. You can exchange from property held for investment into other property held for investment – property held for business use can be exchanged into other property held for business use.

For some examples you can exchange from apartments to single tenant net leaded properties and raw land for raw land also qualifies.

You cannot exchange a property that was held for investment for a property to be used for personal use. You also cannot exchange investment property for land to develop and sell as lots; this is classified as dealer activity and would be taxable like any real estate transaction.

The Value/Debt/Equity Calculations
If a fully tax deferred exchange is the goal the following specific rules must be strictly adhered to or you will not achieve the desired 1031 Exchange Status:
1) The value of the replacement property must be equal to or greater then the value of the relinquished property.
2) The debt of the replacement property must be equal to or greater than the debt on the relinquished property.
3) The equity in the replacement property must be equal to or greater than the equity in the relinquished property.

The 45/180 Day Requirements
The property that is to be received must be identified with 45 days from the date of settlement for the actual relinquished property. The received property must be settled (transferred) within 180 days after the settlement date of the relinquished property.

Identification Rules
The identification process is the step where the Exchanger identifies his or her potential replacement property that is being considered for the acquisition as part of the 1031 Exchange. This is only an identification requirement and the property do not need to be under contract or in escrow; however the final transaction must be completed within the 180 day required period.

We only recommend giving or delivering the identification to the Qualified Intermediary and no one else. As identifications made to any other party raise the question as to whether it will qualify as a valid identification of replacement property.

The identified properties must be unambiguously identified by the property address, or the legal description, or the Assessor's Parcel Number, or all three to the Qualified Intermediary so the final transaction and related paperwork can be completed within the allotted time period.