What is 1031 Land Exchange?
A 1031 land exchange is beneficial to real estate owners and investors. The IRC (Internal Revenue Code)sections 1031 states that real estate owner can sell property, and then use those revenues to invest in similar property to defer the capital gains tax.

Eligible for 1031 Land Exchange?
Property exchanges must be completed in accordance with the rules set forth in the tax code and the treasury regulations to qualify for a 1031 Exchange. The general rules consist of the following:

• The properties that you sell and buy must both be held for productive use in a trade, business, or investment purposes, and must be similar.
• The proceeds from the sale must go through the hands of a qualified intermediary. If the proceeds go through anyone else's hands, all the proceeds will become taxable.
• All of the cash proceeds from the original sale must be used to purchase the replacement property. Any cash that you retain will be taxable.
• The replacement property must have an equal level or greater level of debt than the relinquished property, or the buyer will have to either pay taxes on the amount of the decrease or have to provide the remaining costs to offset the lower level of debt in the replacement property.

Reasons for a 1031 Land Exchange?
The main reason to consider a 1031 Land Exchange is to defer paying most to all of your capital gains taxes. Some other reasons include:

• Upgrade or consolidate property.
• Diversify by owning multiple properties rather than just one.
• Relocation to a new area.
• Differences in regional growth or income potential.
• Change property types among commercial, retail, etc.

* Disclaimer: There are substantial risks associated with the federal income tax consequences of purchasing and owning real property, especially if the purchase is part of a tax-deferred exchange under section 1031 of the code. In addition, the income tax consequences of purchasing and owning real property are complex. Because the tax consequences are complex and certain of the tax consequences may differ depending on individual tax circumstances, each prospective purchaser must consult with and rely on his own independent tax advisor concerning the tax consequences of such a purchase and his individual situation.

» View 1031 Land Exchange Info from the FEA

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