Welcome or Register

Section 1031 Tax Deferred Exchange

 

An Internal Revenue Code Section 1031 Tax Deferred Exchange involves the sale of real estate held for investment and deferring the payment of any capital gains tax incurred as a result of the sale of said real estate by purchasing replacement like-kind (investment) real estate. Please be advised any capital gains taxes that may be owed will simply be deferred and not eliminated.

The parcels must be of the same classification, but do not have to be of the exact same type. For example, the property sold can be a rental house held for investment, and the property purchased can be a condominium or land which will be held for investment. You may purchase more than one property, but not more than three. The only requirement is the property sold and purchased must be classified by you as investment property, and the total value of the property purchased must be of equal or greater value than the property sold. This means sale price for sale price, and not what you netted from the sale. You will responsible for consulting or verifying with your accountant or other tax professional whether the transaction you are contemplating qualifies or is in your best interest.

To initiate the exchange, you and the escrow holder must execute a Section 1031 Tax Deferred Exchange Escrow Agreement regarding the escrow of the proceeds received from the sale of the primary property (the property you are selling). You must also execute an assignment which assigns to the escrow holder all of your interest in and to the contract to sell the primary property. Both documents must be executed prior to or at closing of the primary property. Please note that no earnest money or other funds related to the sale can be paid to or received by you in any way, either directly or constructively, which relate to the sale of the primary property. Once the escrow agreement has been executed by all parties, you will have no further rights to the earnest money or the escrowed funds in any way, except as provided by the terms of the escrow agreement. The net sale proceeds must be paid to and held by the escrow holder by the seller(s) or the closing agency, if applicable, and thereafter, the escrow agent will escrow the funds until the time of closing of the property you are purchasing as the replacement property.

Subsequent to the closing of the sale of the primary property, you must identify the property you intend to purchase as the replacement property. Please be advised you must notify the escrow holder in writing of the identity of the property you are purchasing, and such written identification must be delivered to the escrow holder no later than 45 DAYS from the date of closing of the primary property you are selling. Upon completion of the contract(s) to purchase the property you intend to purchase as the replacement property which was properly identified, you must then execute another assignment which assigns to the escrow holder all interest in the contract(s).

You must complete the purchase and formally close on the property you are purchasing as the replacement property within 180 DAYS from the date you closed on the property you are selling, and not from the date of the identification letter. Prior to or at the closing of the property you are purchasing as the replacement property, you must give written notice to the seller(s) of the property and the closing agency, if applicable, that all or a portion of the purchase proceeds will be remitted to the seller(s) or the closing agency by the escrow agent or other qualified intermediary at the time of closing. The notice must be delivered to the seller(s) prior to or at the closing of the property you are purchasing, and the seller(s) must acknowledge in writing their receipt of said notice. The escrow holder will deliver to the seller(s) or the closing agency the balance of the escrowed funds or the amount necessary to complete the purchase.

Your understanding and comprehension of the transaction is essential. Please note that this general information is to be used exclusively for and limited to informational purposes only; therefore, you should consult and verify with your accountant or other tax professional whether the transaction you are contemplating qualifies or is in your best interest.


If this is your first visit  or you've visited our old web site, you may like our new look, so take your time and browse. We have plenty of information and resources available to you.   We appreciate hearing from you and promise to not pressure, just give you the information to a property you may be interested. You won't be a number. We believe in  the basics, relationship building. If you are not into that..lol...it's quite alright, just keep on browsing. We have continued up to date properties and information. Again, our sincere appreciation for allowing the oldest family owned boutique real estate agency since 1983, on the Gulf Coast to have you as our guest. We are that LITTLE PINK building on West Beach. We are a landmark.

Contact Me

Shirlee Poulos
500 West Beach Blvd.
Gulf Shores, AL 36542
Phone: 251-968-2330
Email: shirlee@carneyrealtyinc.com







* fields are required