1031 Exchange

Did You Know?
1031 exchanges provide investors with one of the best tax strategies for preserving the value of an investment portfolio. By using an exchange the investor is able to defer capital gain taxes that would otherwise be incurred on the sale of investment property.

The investor can then use the entire amount of the equity to purchase substantially more replacement property. To qualify as an exchange the relinquished and replacement properties must be qualified “like-kind” properties and the transaction must be structured as an exchange. Using a qualified intermediary, the investor with the necessary reciprocal transfer of properties to create the exchange and the “safe harbor” protection against actual and constructive receipt of the exchange funds required by 1031.

GET IN TOUCH

THE PROCESS

The exchanger signs a contract to sell a relinquished property to the buyer.
The qualified intermediary and the exchanger enter into the exchange agreement.
At the closing of the relinquished property the exchanged funds are wired to the qualified intermediary and the qualified intermediary instructs the settlement officer to transfer the deed directly from the exchanger to the buyer.
The exchanger has a maximum of 180 days in the exchange period (or until tax filing deadline, including extensions, for the year of the sale of the relinshiqed property), to acquire all replacement property.

The exchanger must identify possible replacement properties in writing to the qualified intermediary within the 45-day identification period.
The exchanger signs a contract to purchase the replacement property with the seller and the exchanger assigns the exchangers rights in the purchase contract to the qualified intermediary.
At the closing of the replacement property the qualified intermediary wires the exchange funds to complete the exchange and the qualified intermediary instructs the settlement officer to transfer the deed directly from the seller to the exchanger.

EXCHANGE REQUIREMENTS

As a general rule of thumb, to avoid paying any capital gains taxes in exchange, the investor should always attempt to:

1. Purchase equal or greater in value.
2. Reinvest all of the equity in replacement property.
3. Obtain equal or greater debt on replacement property.
Exception: A reduction in debt can be offset with additional cash from exchanger, but increasing debt cannot offset a reduction in exchange equity.

Calculating the Capital Gains Tax

The gain, not the profit or equity, from the sale of investment property is subject to the combination of capital gains taxes and the tax on recapture of depreciation. It is possible for an investor to have little or no equity or profit upon sale and still owe capital gains taxes. Investors should consult with their tax or legal advisors prior to entering into an exchange.

Tax Benefit of Exchanges

Whether the investor’s property is owned free and clear or encumbered, the benefits of a tax deferred exchange are significant. The tax dollars saved by an exchange can be utilized to purchase additional investment property.

A “Like-Kind” Property

To qualify as a “like-kind” property for a 1031 exchange the investor’s relinquished property and replacement properties must be property that has been and will be held for productive use in the investor’s trade or business or for investment.

Office/Medical
Industrial
DST(Fractional Ownership)
AG/Vacant Land
Retail

Multi-Family
Hospitality
Mixed-Use
Duplex-Fourplex
Residential Rentals

      EXCELLENT  
   Based on 23 reviews 
    
 
 
 
   
 
 
       Posted on Google  
   
   Wendy  
 
 
 
 Trustindex verifies that the original source of the review is Google. We have been working with Charlotte for several years and we can’t say enough good things about her. We were pretty particular about what we wanted for our home purchase, and throughout this challenging market she stuck by us and helped us find our perfect home. She has been kind, patient, and understanding every step of the way. We had a complicated issue come up that caused problems with the closing (no fault of ours or any agency involved) and Charlotte went above and beyond to make sure our closing did not fall through. I could not imagine going through this without her. I highly recommend Charlotte and Herrick Lutts!
  
 
      Posted on Google  
   
   Ryan  
 
 
 
 Trustindex verifies that the original source of the review is Google. Charlotte went above and beyond for her client on their purchase.  After another lender denied their loan due to some intricacies with the condo Charlotte researched and found that I had done multiple loans in the association without issue.  She put the clients in touch with me and they closed last week.  She was able to keep their dream of homeownership alive with her hard work!  Great job Charlotte.
  
 
      Posted on Google  
   
   Kevin  
 
 
 
 Trustindex verifies that the original source of the review is Google. Worked with Peter and Paul on purchasing a new home as well as selling my old condo, and both experiences were fantastic. I'd recommend them to anybody looking!
  
 
      Posted on Google  
   
   Zachary  
 
 
 
 Trustindex verifies that the original source of the review is Google. Paul is a stand up guy and I highly recommend working with him. Made the house buying process a breeze.
  
 
      Posted on Google  
   
   Libby  
 
 
 
 Trustindex verifies that the original source of the review is Google. Paul and Jason were amazing. They took the time to understand our needs and budget, then sourced properties accordingly. They were very patient with us as we saw over 28 homes in 3 weekends. Once we found the perfect house, they were so helped us understand what was needed from us and their team kept everything organized to meet our accelerated timeline to close. They then moved into action to assist with selling a second property. I would HIGHLY recommend Herrick Lutts for all your real estate needs!
  
 
      Posted on Google  
   
   Doug  
 
 
 
 Trustindex verifies that the original source of the review is Google. Paul and Jason made the entire experience of selling my house very easy for me during a tough time in my life as my wife recently passed away. They handled everything in a professional manner and everything went extremely well. For me, they did all the work and kept me informed all along the way. They took care of every detail from listing the house, to coordinating open house to suggesting a great lawyer to getting permits and having a facet replaced.  They made it an easy transition for me.  I would highly recommend Paul and Jason (Herrick-Lutts) Reality Partners to anyone in the market of selling a house.  I know Herrick-Lutts has always been very generous to the community donating to non-profits and sponsoring events.
  
 
      Posted on Google  
   
   Sue  
 
 
 
 Trustindex verifies that the original source of the review is Google. Charlotte was easy to work with, always professional and helped me find a condo that checked all my boxes.  She took the time to get to know what I was looking for and we were able to make a match.  She would be an asset to anyone looking for a home on the North Shore.
  
 
      Posted on Google  
   
   Dean  
 
 
 
 Trustindex verifies that the original source of the review is Google. M Thank you Paul, Jason and the whole Herrick Lutts team! Truly a first class organization! Great guidance from start to finish. H L always had the answers and eased us through an extremely stressful sale of our home. I love you guys!!