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Like-Kind (1031) Exchanges

With the potential for substantial tax savings in every transaction, like-kind exchanges have become a necessary procedure for owners of business and investment property for all types and sizes.  Federal law today encourages tax-deferred simultaneous and delayed like-kind exchanges of qualifying property. 

Delmarva 1031 Exchange Services, LLC, an affiliate of Twilley, Rommel & Stephens, P.A., can act as a qualified intermediary for your like-kind exchange
or as a qualified exchange accommodator for a reverse exchange.

1031 Exchange Defined

 A tax-deferred exchange is a method by which a property owner trades one property for another without having to pay any federal or state income taxes on the transaction.  In an ordinary sale transaction, the property owner is taxed on any gain realized by the sale of the property.  In a like-kind exchange, however, the tax on the transaction is deferred until some time in the future, usually when the newly acquired property has been sold. 

These exchanges are sometimes called tax-free exchanges because the exchange transaction itself is not taxed. 

How it works

 In an exchange, a property owner simply disposes of one property and acquires another.  The transaction must be structured in such a way that it is, in fact, an exchange of property rather than a taxable sale of one property and the purchase of another. 

A sale and reinvestment into a replacement property are converted into a like-kind exchange by means of an Exchange Agreement and the services of a Qualified Intermediary--a third party who helps make sure that the exchange is structured properly.  The regulations require that the seller not have access to the cash at settlement; the proceeds of sale must go directly to the Qualified Intermediary at settlement. 

Contact

 Robert Stephens, CPA is a Certified Exchange Specialist.  For more information, please contact him at (410) 749-1919.