The basics of a 1031 Exchange in Utah
A 1031 exchange or also known as a like-kind exchange, is a
a tax-deferred transaction that allows an individual (or business) to sell
a property, without paying capital gains tax on the sale by reinvesting
the proceeds into a new investment. 1031 exchanges are only
available for real property (land, buildings, and other permanent
structures).
You will notify and use an Intermediary, a qualified intermediary (QI)
when selling a property to have them hold the funds from the sale
until the funds are needed to purchase the replacement property.
Up to 3 properties may be identified to replace the original property
within 45 days of settlement. These potential properties must be of
like-kind and equal to or greater in value than the property being sold.
There will be 180 days to close on the replacement property. Your QI
will complete the exchange.
Four types of 1031 exchanges may be used in Utah
The most common type of exchange is Delayed Exchange which is
when the original property is sold and then the replacement property
is purchased within 180 days.
A Simultaneous Exchange is when an original property is sold and the
replacement property is purchased at the same time.
The Reverse Exchange occurs when the replacement property is
purchased first and the original property is sold later.
Improvement Exchange also known as a construction or build-to-suit
exchange which allows an investor to use the proceeds from the sale
of the original property to fund improvements or construction on the
replacement property.
Examples of transactions that typically do not qualify for a
1031 Exchange in Utah
Your primary residence & personal property, such as furniture, cars, and art do not qualify. There are some situations where a rental or
investment property may qualify under certain terms, check with your
QI and or accountant/tax professional. In the event a property has
been owned for less than a year or if the property is located outside
the USA it will not qualify.
NOTE: There are specific rules and regulations that must be met for a 1031 exchange to
be valid. Investors should work with a QI and or consult their accountant.
