Explaining a 1031 Investment Exchange & How it Bolsters Your Assets

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If you are selling an investment property, then you will definitely want to look into a 1031 Exchange. This exchange is called a "1031" Exchange because it comes from section 1031 of the Internal Revenue Code. The greatest advantage to a 1031 Exchange is that you can use the government's money to grow your holdings and save money on taxes.

Using this exchange, an investor can sell a property and purchase another property (or properties) as long as they are equal in value to the property being sold. The IRS code actually reads: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held either for productive use in a trade or business or for investment."

To elect for a 1031 Exchange a property owner must identify the property for exchange before closing. Once an exchanger sells a property, they have 45 days to identify a property of equal or lesser value. Once an adequate property is identified, an exchanger then has 180 days to close the property.

A qualified intermediary must be used in the transaction to hold all profits from the sale, which will then be distributed after the closing of the property.

If you need more information about this subject, this is a highly informative article: http://homebuying.about.com/od/1031exchanges/qt/31709_Exchanges.htm

If you need any assistance with a 1031 Exchange, or need any real estate assistance in the Arlington or Washington D.C. areas, then please contact me at (301) 660-6272 or visit www.Help2OwnAHome.com