Spectrus Real Estate - 1031 Exchange Resources

As 1031 exchange specialists, Spectrus Group specializes in 1031 exchange properties. We provide investment real estate solutions that can help you maximize capital gains and defer capital gains tax.

A 1031 exchange, also known as a 1031 Like-kind Exchange or Starker Tax Deferred Exchange, is the process where a real property owner can sell certain property and then utilize the proceeds to purchase ownership in like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to real estate buyers.       

The reasoning behind the 1031 exchange is that since the taxpayer is merely exchanging one property for another property (or properties) of “like-kind” there is nothing received by the taxpayer that can be used for paying taxes. As a result there can be tax advantages to real estate buyers as the gain is locked up in real estate and so no gain or loss can be claimed. Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031.

Example of a 1031 Exchange

An individual purchases or buys a commercial property such as an office building for $200,000.         After five years, he or she sells the property for $250,000. This would result in a gain of $50,000 on which the individual would have to pay a capital gains tax, but, if he or she utilizes the proceeds from the $250,000 sale to purchase or buy another property, then he or she would not have to pay any taxes on the gain at that time.       

More 1031 exchange information is available at the Spectrus website or by calling 1-866-587-7328.