Our Ultimate Guide to 1031 Exchanges provides a very comprehensive understanding of how this vehicle works and why investors love it for maximizing profits and minimizing taxes. We also walk you through the step-by-step process of actually doing a 1031 exchange, what to expect, and best practices. Because 1031 exchanges are very complex and come with a number of rules and regulations, this article helps you avoid common mistakes and shares best practices for a successful 1031 experience.
First, let’s start with common mistakes to avoid:
In a 1031 Exchange, there are certain restrictions on the identification of replacement property(ies). The taxpayer can only identify up to three potential replacement properties, regardless of the fair market value of each property. Alternatively, the taxpayer can identify an unlimited number of properties as long as the aggregate fair market value of the properties does not exceed 200% of the fair market value of the relinquished property.
1031 Exchanges can be applied to various asset classes, including real estate, personal property, and intangible property. However, there are some differences between the 1031 Exchange rules for each asset class.
When selecting a 1031 Exchange attorney, it is important to consider the following factors: