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Defer Tax Gain into New Replacement Property
1031 TAX DEFERRED EXCHANGES
William E Bryant CPA, CVA & Realtor - Copyright 2...
• Trade of Like-Kind Property for Like-Kind Property
– Real Property Exchanged for other Real Property
• Must be Property ...
• Tax Consequences of Traditional Sale vs 1031 Exchange
– Traditional Sale of Property – Typical Transaction (See Chart)
•...
Disbursement of Cash Proceeds on Typical Sale – Assume No Loan Payoff
EXAMPLE: TAX CONSEQUENCES OF TRADITIONAL SALE
Willia...
Low Tax Basis
Fair Market Value
Of
Replacement Property
Large Capital…
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Relinqu...
• Identify a Qualified Intermediary (“QI”) and Closing Agent
and/or Title Company to handle the Transactions.
• Sell the R...
Sell Relinquished
Property
45 Days to Identify
Replacement Property
180 Days to Close on
Replacement Property
TIMELINE FOR...
TAX BASIS OF REPLACEMENT PROPERTY
William E Bryant CPA, CVA & Realtor - Copyright 2016
Tax Basis of Property Relinquished
...
• The Ownership in the Replacement Property must be identical to
the Ownership in the Relinquished Property.
• There is a ...
• For more information about 1031 Tax Deferred Strategies:
– Or to work with a Qualified Intermediary
– Or to assist in th...
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Tax Deferred Exchanges

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Tax Deferred Exchanges

  1. 1. Defer Tax Gain into New Replacement Property 1031 TAX DEFERRED EXCHANGES William E Bryant CPA, CVA & Realtor - Copyright 2016
  2. 2. • Trade of Like-Kind Property for Like-Kind Property – Real Property Exchanged for other Real Property • Must be Property Held for Investment in the same Property Class. – For example, Land can be exchanged for other Land, or exchanged for Rental Property or Commercial Property, since it’s in the same Class. – Personal Property for Personal Property • Antique Car for Antique Car • Artwork & Collectibles for other Artwork & Collectibles – What does NOT Qualify? • Trading Personal Property for Investment Real Property – Mixed Class • Partnership Interest (considered Personal Property) for Real Property • Trading your Principal Residence (not considered an Investment Property) WHAT QUALIFIES FOR A 1031 EXCHANGE William E Bryant CPA, CVA & Realtor - Copyright 2016
  3. 3. • Tax Consequences of Traditional Sale vs 1031 Exchange – Traditional Sale of Property – Typical Transaction (See Chart) • Must pay Federal and State Income Taxes on the Capital Gain. – Pay higher Tax Rate on Recapture of Depreciation on those Assets. – Have less Net Cash Proceeds Available to Reinvest in Replacement Property. – Tax Deferred 1031 Exchange (See Chart) • No Taxes paid if you “Trade Up” and if no Cash is received. • Transfer low tax basis into the Replacement Property. • Defer Large Capital Gain until Final Sale or Include later in a Final Estate. TAX BENEFITS OF A 1031 EXCHANGE William E Bryant CPA, CVA & Realtor - Copyright 2016
  4. 4. Disbursement of Cash Proceeds on Typical Sale – Assume No Loan Payoff EXAMPLE: TAX CONSEQUENCES OF TRADITIONAL SALE William E Bryant CPA, CVA & Realtor - Copyright 2016
  5. 5. Low Tax Basis Fair Market Value Of Replacement Property Large Capital… 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Relinquished Replacement EXAMPLE: TAX DEFERRED 1031 EXCHANGE William E Bryant CPA, CVA & Realtor - Copyright 2016 Low Tax Basis is Transferred and Large Capital Gain is Deferred into Replacement Property
  6. 6. • Identify a Qualified Intermediary (“QI”) and Closing Agent and/or Title Company to handle the Transactions. • Sell the Relinquished Property via the QI – Now the Clock starts ticking! • You have 45 Days to identify a Replacement Property. • You have a total of 180 Days to Close on the Replacement Property via the QI. • Review the following Timeline WHAT STEPS ARE NEEDED IN A 1031 EXCHANGE William E Bryant CPA, CVA & Realtor - Copyright 2016
  7. 7. Sell Relinquished Property 45 Days to Identify Replacement Property 180 Days to Close on Replacement Property TIMELINE FOR A 1031 EXCHANGE TRANSACTION William E Bryant CPA, CVA & Realtor - Copyright 2016
  8. 8. TAX BASIS OF REPLACEMENT PROPERTY William E Bryant CPA, CVA & Realtor - Copyright 2016 Tax Basis of Property Relinquished Plus Expense of Sale Plus Cash Contributed Plus Liabilities Assumed Less Liabilities Relieved Less Cash Received Equals Tax Basis Tax Tip: Tax Basis equals the FMV of the Replacement Property less the Deferred Gain
  9. 9. • The Ownership in the Replacement Property must be identical to the Ownership in the Relinquished Property. • There is a 2-Year Investment requirement if a related Party is involved in the Transaction. • Consider using Tenants in Common (“TIC”) to separate the Property ownership from a Partnership, then proceed with the 1031 transaction with your share as TIC owner. • Reverse Exchanges might be a good strategy in certain Market and/or Unique Opportunity situations. • UpREITS and other Post-Transaction Strategies are possible. OTHER CONSIDERATIONS IN A 1031 EXCHANGE William E Bryant CPA, CVA & Realtor - Copyright 2016
  10. 10. • For more information about 1031 Tax Deferred Strategies: – Or to work with a Qualified Intermediary – Or to assist in the Sale/Purchase of the Real Estate – Or to Consult with a Tax Advisor about your specific situation • Please contact Bill Bryant at 612-872-9684 or email at: • Also please visit: for more info. THANK YOU William E Bryant CPA, CVA & Realtor - Copyright 2016

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