1031 Exchange Investors

Types of Exchanges

Get more information about Traditional, Reverse, and Improvement Exchanges.

Learn More

1031 Exchange Rules

Everything you need to know about 1031 exchanges.

Learn More

Blogs & Events

Learn more about 1031 exchanges.

Learn More

Start Your Exchange

Start your 1031 exchange today and defer capital gains.

Learn More

Why Choose Midland 1031

We offer Personalized Service, Security, and Expertise.

Learn More

Section 1031 of the Internal Revenue Code is one of the last great tax shelters available to investors today. When investment real estate is sold, the seller is responsible for paying capital gains taxes. In some cases, capital gains can be as high as 25 percent. By performing a 1031 exchange, investors can defer payment of these taxes.

As the name suggests, a 1031 exchange is the process of the property for sale being exchanged for a new piece of investment property. As long as this transaction is a “trade up” in value and debt, taxes are completely deferred.

By deferring taxes using a 1031 exchange, the wise investor is able to:

Increase cash flow;
Purchase property in a more favorable area; or
Diversify or consolidate property.

1031 Exchange FAQs

Will My Vacation Rental Qualify For A 1031 Exchange?

Vacations rentals qualify for a 1031 exchange if they have been rented at fair market rates for at least 14 days each 12 month period for at least 2 years prior to the sale. In addition, personal use of the vacation rental can not exceed 14 days (if rented 14 days) or 10 percent of the number of days rented each year during this period.

How Do I Calculate My Capital Gains?

To get an idea of what your capital gains might be, please use our online capital gains calculator found here. We always recommend that you consult with your CPA or tax advisor to officially calculate your capital gains.

What Are The Timing Rules?

There are two important timing rules when it comes to 1031 exchanges, the 45 day rule and the 180 day rule. You have 45 days to identify your replacement properties and you must close on all intended properties within 180 business days. The timeline starts the day you close on your current investment property. You must contact Midland 1031 before closing.

What Is The Same Taxpayer Requirement?

The taxpayer that holds title to the relinquished property is the taxpayer that must acquire and take title to the replacement property. For example, if a partnership owns the relinquished property, then the partnership is the taxpayer that is completing the exchange, not the individual partners. There must be a continuity of taxpayer from beginning to end.

What Is The Most Common Pitfall To Avoid?

Failing to obtain the services of a QI prior to closing. We are often contacted by taxpayers looking to set up the exchange after they have closed on the sale of their relinquished property (or after closing the purchase of the replacement property in the case of a reverse exchange).

Unfortunately, the option to perform the exchange is no longer available once the taxpayer has closed and has constructive receipt of the proceeds. If you are considering a 1031 exchange, it is imperative that you consult with a QI before closing on any transactions.

Am I able to purchase my replacement property before having closed on my relinquished property?

Yes, this is known as a Reverse Exchange.

What if the replacement property I am looking at is well below my Net Selling Price, but needs a significant amount of work? Could I somehow use those improvements towards my exchange value?

Yes, this is known as an Improvement Exchange.

To learn more about the types of exchanges, click here.

Are There Any Other Benefits To A 1031 Exchange Besides Tax Deferment?

Yes! Here are 5 benefits of doing a 1031 exchange besides tax-deferment:

Click here