The Excalibur 1031 Group understands that not everyone knows all of the ins and outs regarding 1031 tax-deferred exchanges, so we have provided a brief Q & A to help you out.

What Is A 1031 Tax-Deferred Exchange?
Tax-Deferred Exchanges were first introduced in 1921 allowing owners of investment property to defer the payment of capital gains associated with the sale of these properties. This procedure is outlined under the Internal Revenue Code Section 1031, and involves a series of rules and regulations that must be met in order to take full advantage of this great tax benefit. As a Qualified Intermediary, Excalibur 1031 Group has a complete understanding of everything that is involved in utilizing this section of the code and will walk you effortlessly through this process.

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Are There Other Names For The 1031 Procedure?
1031 Tax-Deferred Exchanges are also commonly known as:

Starker Exchange
Delayed Exchange
Like-Kind Exchange
1031 Exchange
Tax-Free Exchange
Nontaxable Exchange
Real Estate Exchange
Real Property Exchange

Though all of these terms refer to the same thing, the most typical term used by the industry today is Tax-Deferred Exchange.

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What Is Some Background Of The 1031 Exchange?
When income taxes were first imposed in 1918, gain or loss recognition was required on all disposition of property. Provision for non-recognition of gain or loss on the exchange property was introduced in 1921. Since inception, there has been five major amendments made to the Tax-Deferred Exchange as we know it today.

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What Types Of Property Qualify?
Section 1031 provides that gain or loss is not recognized when property held for productive use in investment, business or trade, is exchanged for "like-kind" property to be held for the same purpose. Any property held for this purpose, and is not your primary residence is eligible for exchange.

Under a mix-property scenario like a owner occupied apartment building, an exchange is still possible. The exchangeable portion will be that portion of the building leased out.

What Is A Like-Kind Property?
The definition of what is "like-kind" for real property is broad, any real estate held for investment purposes are eligible for exchange. These properties include commercial real estate, rental property, bare land, apartment buildings, etc.

What Qualifies As Another Exchangeable Property?
Personal property held for productive use in investment, business or trade may also be exchanged for "like-kind" or "like-class" personal property under IRC 1031. However, the definition for what is "like-kind" or "like-class" for personal property is much more restrictive. For example, while improved real estate may be exchanged for unimproved real estate, a car may not be exchanged for a truck. Please refer to Aircraft/Business Exchanges for more details.

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Do I Have Exchange Choices?
There are many different types of exchanges afforded to you under the code. Knowing which one is right for you depend on your particular needs. Be assured that whatever those needs are, Excalibur 1031 Group will help you determine the best type of exchange to fit them.

The following are the different exchanges available:
Delayed Exchange
Simultaneous Exchange
Improvement Exchange/Build-To-Suit
Reverse Exchange
Aircraft/Business Exchanges

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Can I Do A 1031 Exchange After The Close Of Escrow On The Relinquished Property?
No. Once you have closed escrow and the closing agent has disbursed the funds it is presumed that you have constructive receipt of the funds even if you have not cashed the check. In order to do a 1031 exchange you must have Excalibur 1031 Group involved prior to the close of escrow on your relinquished property.

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Who Qualifies For The 1031 Exchange?
If you are an owner of investment property you may be able to take advantage of this law and save on the state and federal capital gains taxes associated with the sale of your investment property.

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How Can A 1031 Exchange Can Benefit Me?
The 1031 exchange process allows owners of investment property to diversify their real estate assets. An investor can choose to sell a small investment property for a larger property or vice versa. Investment property owners also have the option to exchange one property for several properties or merge several properties into one. Investors can achieve geographical diversity by exchanging their real estate holdings anywhere in the United States. There are many choices and opportunities available and Excalibur 1031 Group will help find the best fit for you.

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Why Is There An Initial 45-Day Time Period?
An exchangor has 45 calendar days from the close of escrow on the relinquished property to identify up to three investment properties. Certain restrictions apply if an exchangor would like to identify more than three properties and they should first contact Excalibur 1031 Group for details.

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How Do I Identify Exchange Property?
An exchangor formally identifies replacement property by submitting a written form to Excalibur 1031 Group indicating each property they intend to purchase. This form can be mailed, hand delivered, or faxed to Excalibur's office. The exchangor may also choose to identify additional properties that they would consider to be in "back up" position. Call Excalibur 1031 Group for details.

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How Does An Exchange Total A 180-Day Time Period?
Once the 45-day time period has lapsed, the exchangor has an additional 135 days to close on any and all replacement properties. The combined 45 days to identify and additional 135 days to close constitutes a total of 180 days to complete an exchange transaction. Please take note that if you close escrow on the sale of your investment property after October 15th, you will need to file a tax extension to use the full 180 day benefit.

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