Anatomy of a Successful 1031 Exchange

Author

Ken Wimberly

Navigating the waters of a 1031 exchange can sometimes be a rather intimidating process. There are strict guidelines that must be followed, and time is certainly of the essence. And it seems that almost everyone has heard about what you can and can’t do with a 1031 exchange. Unfortunately, much of what they have heard is often misinformation.

Below are five of the top myths I have recently heard regarding what is allowed with a 1031 exchange:

1. “I only have to reinvest my gain in the property.”
2. “I have to reinvest in the same asset class that I sold.”
3. “I can just backdate my property identification if I find one after the 45-day ID period.”
4. “I don’t have to put debt on my new property, even though I had debt on the property that I sold.”
5. “The property I am selling is an LLC with several other members. We (the respective LLC members) are going our separate ways and I am going to use a 1031 exchange for my proceeds.”

Yikes! Following the wrong advice can really get us in trouble. Any of the above statements could result property acquisition mis-steps, potential tax liability of some or all of the proceeds, and potential penalties from the IRS.

The diagram below was prepared to provide a visual representation of a successful 1031 exchange. There are myriad complexities and nuances that must be considered. We would be happy to help you navigate those waters. Our team of experts includes 1031 qualified intermediaries, attorneys, tax advisors, and real estate professionals.

It is our honor to be the company of choice for so many investors. We would welcome a call to discuss your particular commercial real estate investment needs. Please call us at (817) 200-7620 to set up a consultation.

Share