Is a 1031 Exchange Possible After I sell my Property?
posted Jun 5, 2017 by Stephanie Burns, EA in the Global Tax Blog
Looking to lessen your capital gains tax dues on a highly appreciated business or investment real estate? A 1031, or “like-kind” exchange is a helpful tool for individuals looking to avoid taxes, trade vacant land for improved property, acquire property in higher market areas, restore depreciation deductions, and more. But, is this tool available after you sell your property? Let’s find out.
More about 1031 exchanges
Under Section 1031 of the Internal Revenue Code, you may exchange business or investment property (the relinquished property) for like-kind business or investment property (the replacement property) without recognizing any gain or loss until you dispose of the replacement property. Learn more about the basics of 1031 exchanges in our past blog.
So...is it possible after I sell my property?
This is a frequently asked question. After property is sold, the title is transferred, and the money accepted—a 1031 is not possible!
The proceeds from the sale must be used to purchase the other asset within 180 days of the sale of the first asset, however you must identify the property or asset that you are purchasing in the like-kind exchange within 45 days of the sale.
When else is a 1031 NOT possible?
Exchanges of the following properties do not qualify as “like-kind” exchanges:
- Stock in trade or other property held primarily for sale (inventory, in other words)
- Stocks, bonds, notes
- Primary residences
- Other securities or evidence of indebtedness
- Certificates of trust or beneficial interests
- Partnership interests
Lastly, bear in mind that foreign property is not like-kind to US property.