1031 Exchange

The Internal Revenue Code states that no gain or loss shall be recognized on the exchange of property held for productive use in trade or business or for investment purposes if such property is exchanged for like-kind property to be held for productive use in trade or business or for investment.

Meeting the criteria of Internal Revenue Code 1031 enables the taxpayer to defer taxes on the gain realized on the "exchange" and reinvest the respective capital in another like-kind asset. Much latitude is given in the definition of "like-kind" property in terms of real estate. For example, improved or unimproved property, commercial or residential, is considered "like-kind." Real estate, whether used in a trade of business or held for investment is considered "like-kind."

Anyone considering selling real estate used in a productive trade or business or held for investment purposes should consider a 1031 exchange. A 1031 exchange offers the astute investor the opportunity to defer federal income taxes typically paid to the IRS and utilize the resulting capital to produce additional income and make investments.

The rule also required that the "Exchanger" use a safe harbor to hold the proceeds while the exchange was in progress, and spelled out what those safe harbors were.


The Only Practical Safe Harbor for most "Exchangers" is a Qualified Intermediary. Gibraltar Title Agency is a Qualified Intermediary, and is set up to assist you in making a smooth and easy exchange.

If you would like more information about setting up 1031 exchange feel free to contact Jeff Nycklemoe before your first transaction at (952) 392-7124.