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What is A 1031 Exchange?
Internal Revenue Code Section 1031 provides that no gain or loss will be recognized on the exchange of any type of business use or investment property for any other business use or investment property. 1031 Exchanges are not really exchanges in the context of two-party barter. Instead, they are typical sales and purchases that involve the same exact ingredients as any other sale or purchase, without the capital gains. The only real difference is the investor is increasing his selling and buying power by electing to avoid the drain of taxes under Section 1031 regulations. No other aspects of the transaction are affected.

Through the 1031 exchange, the investor (Exchanger) disposes of an investment in existing property (Relinquished Property), uses the equity from the Relinquished Property to acquire a "like-kind" investment (Replacement Property), and defers the capital gains tax. The properties must be like-kind and held for productive use in a trade or business, or held for investment. (See example.)

Able Title Agency will arrange for a Qualified Intermediary to act as an independent third party to your exchange transaction. The Qualified Intermediary will facilitate the exchange of properties, hold the proceed from the closing of the Relinquished Property, and supply the necessary documents. Note the following:

Example tax savings of real property:
	Sale	Exchange

Property	$1,000,000	$1,000,000
Basis	$0	$0
Gain	$1,000,000	$1,000,000
Gain tax 20%	$200,000	$0

Amount of reinvest	$800,000	$1,000,000

The IRS allows the capital gains tax on your like-kind exchange to be deferred
The right investment during the exchange process may provide a competitive return on the tax deferred proceeds during the exchange.
1031 Exchange Services have been carefully structured to be in full compliance with the regulatory requirements of the Treasury Department.

Who Should Consider A 1031-Exchange?
Anyone who is thinking about selling a business use or investment property should consider affecting a 1031 Exchange. A 1031 Exchange offers the astute investor an opportunity to reinvest the federal capital gains that would normally be handed over to the IRS and put that money to work for himself. You work too hard to simply pay the tax without carefully considering this reinvestment option. Essentially, 1031 Exchanges should be thought of as an interest free loan from the IRS; one in which the principal may be increased through subsequent exchanges and may never require repayment, if you plan properly. Below is a variety of properties that may be exchanged through IRC 1031. (This is only a sample list and does not include every type of asset that may be exchanged.)

Asset Types Real property
Commercial Mines and Quarries Multiple family dueling	Residential rental Restaurants Retail	Timber and timberland Undeveloped Real Estate Warehousing facilities
Personal property
Aircraft Antiques Art Computers Construction equipment Franchise licenses	Gas and oil production equipment Horses Machinery and equipment Passenger fleet vehicles Professional sports contracts Public utility equipment	Railcars Ship Trucks Violins Yachts

For more information or to put Able Title Agency's 1031 Exchange Services team to work for you,
contact us at 248-538-8900.