Sunday, June 13, 2004



BACK IN THE 1990s the I.R.S. implemented rules on Deferred Exchanges.

Section 1.1031 of the Internal Revenue Code laid out in detail the procedure for turning a sale and purchase type transaction into an “EXCHANGE”…and these new rules let owners of certain types of “like kind” Real property to sell that property and buy other “like kind” property without paying the Capital Gains Tax. And the “like kind” provision was (and IS) quite broad in that it includes Land, Rental, and Business property, any of which, can be exchanged for the other.

ONE IMPORTANT DETAIL OF THE IRS RULE is that those who are exchanging “like kind” properties (called the “Exchangers") MUST use a safe harbor to hold the proceeds while the exchange is in progress. The same rule spelled out what those safe harbors were.

The only practical safe harbor for most "Exchangers" is a "Qualified Intermediary."

A QUALIFIED INTERMEDIARY holds the proceeds from the sale of the Relinquished (sold) Property and cannot be related to the Taxpayer. Intermediary must be registered with Nevada Real Estate Division for transactions in Nevada. Taxpayer must enter into Exchange Agreement prior to the closing of the Relinquished Property. S/he is the "middle person" who facilitates the exchange while protecting the proceeds from the sale of the relinquished property and transfers the proceeds to the appropriate recipient of the transaction.


• For Real Estate Investors, the LIKE-KIND EXCHANGE can be a real boon.

Therefore, it is important to find a QI with whom to establish a relationship who can give you a complete explanation of what 1031 Exchange is and how you can use one to save BIG on Capital Gains Taxes.

• You will discover just how much a 1031 Exchange can save you in capital gains tax over the years. I am happy to send you a link to a Capital Gains tax estimator for this purpose…just email me right from this page.

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