What qualifies a property for a 1031 exchange?

As mentioned, a 1031 exchange is reserved for property held for productive use in a trade or business or for investment. This means that any real property held for investment purposes can qualify for 1031 treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family residence.

Is it worth doing a 1031 exchange?

Investors really like a 1031 exchange because they avoid paying taxes. The more taxes investors pay Uncle Sam, the less cash they have to reinvest.

What are the four different types of 1031 exchange structures?

The Main 4 Types of 1031 Exchanges

  • Two-Party Simultaneous Exchange. Simultaneous exchanges are the oldest of these four 1031 exchange methods.
  • Delayed Exchange. Delayed exchanges are the most common form of 1031 exchanges.
  • Reverse Exchange.
  • Construction/Improvement Exchange.

Are Section 1031 exchanges still allowed?

Under the Tax Cuts and Jobs Act, Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

What are the disadvantages of a 1031 exchange?

Potential Drawbacks of a 1031 DST Exchange

  • 1031 DST investors give up control.
  • The 1031 DST properties are illiquid.
  • Costs, fees and charges.
  • You must be an accredited investor.
  • You cannot raise new capital in a 1031 DST.
  • Small offering size.
  • DSTs must adhere to strict prohibitions.

What is the most common 1031 exchange?

The most common usage of 1031 is the delayed exchange. The investor sells the original property (referred to as the relinquished property) and directs the proceeds to the Qualified Intermediary. This transfer is essential for the successful completion of the exchange.

What is the most common type of 1031 exchange?

The delayed exchange
The delayed exchange is the most common form of 1031 exchanges. A delayed 1031 exchange occurs when the business or investor relinquishes the initial property before identifying and acquiring the replacement property.

Can you still do a 1031 exchange in 2021?

If the sale of your Relinquished Property closed on or between October 18, 2021 and December 31, 2021, the standard 180-day exchange period will be shortened. However, you can file for a tax extension by April 15, 2022 to obtain a full 180-day exchange period.