Do you have investment property you would like to sell but don't want to pay capital gains taxes on it?
The Internal Revenue Service's 1031 Tax Deferred Exchange Code created a code to help you accomplish just that.
This code allows owners of investment property or business property to exchange real or personal property currently held for investment or productive use, for "like kind" property without having to pay capital gains taxes on it until the replacement property is sold.
"Like kind" is not as limiting as it sounds. You may exchange a parking lot for a condo that you rent out part time or farm land for a villa that you use for business purposes. As long as both properties are held primarily for investment or business use they will probably qualify for a 1031 exchange.
Similar to moving a 401K, the proceeds cannot come into your control or any of your agent's control. Which means that not only can you not deposit it into any of your accounts but neither can your lawyer or accountant hold the money for you. It must be an independent third party or qualified intermediary (QI) that holds the money until it is re-invested. The qualified intermediaries are bonded and insured. These entities also provide many supportive services during the transaction.
