A 1031 exchange can provide real estate investors with an opportunity to sell qualifying investment or business real estate and reinvest in other qualifying real property while potentially deferring recognition of capital gains. Because 1031 exchanges involve strict requirements and deadlines, having experienced real estate guidance throughout the buying and selling process can be especially important.
ProStar Realty has served Arizona real estate clients since 1992 and can assist investors with the real estate side of a 1031 exchange, from selling an existing property to identifying and purchasing potential replacement properties.
A 1031 exchange, also known as a like-kind exchange, is named after Section 1031 of the Internal Revenue Code. In general, it allows qualifying real property held for investment or business purposes to be exchanged for other qualifying real property.
The properties do not necessarily have to be identical. Depending on the circumstances, an investor may be able to exchange one type of investment real estate for another, such as a rental property for land or other investment real estate.
A primary residence generally does not qualify simply because it is real estate. The property must meet applicable IRS requirements for business or investment use.
Timing is an important part of a deferred 1031 exchange.
Generally, an investor must:
Identify potential replacement property within 45 days after transferring the relinquished property.
Receive the replacement property within 180 days after the transfer of the relinquished property, or by the applicable tax-return due date, including extensions, if earlier.
Because these deadlines can move quickly, investors often begin discussing replacement-property options before their existing property closes.
Depending on your investment goals and the requirements of your exchange, potential replacement properties may include:
Residential investment properties
Land
Commercial real estate
Multifamily properties
Other qualifying real property held for business or investment purposes
ProStar Realty works throughout the Phoenix Metro area, Maricopa County, Yavapai County and Coconino County and can help investors identify real estate that fits their search criteria.
A 1031 exchange involves more than finding another property. The timing of the sale and purchase, availability of replacement properties and coordination between the parties can all affect the transaction.
Our role is to help with the real estate portion of your exchange, including:
Marketing and selling your existing Arizona property
Searching for potential replacement properties
Evaluating available real estate based on your criteria
Preparing and negotiating real estate contracts
Coordinating transaction timelines with the other professionals involved
Helping navigate inspections, due diligence and closing
ProStar Realty assists clients with residential investment properties, land and commercial real estate, giving investors access to experienced guidance across multiple property types.
A 1031 exchange has specific federal tax requirements, and investors generally use a qualified intermediary to facilitate a deferred exchange and handle exchange proceeds.
Your real estate broker is only one member of the team. Before proceeding with a 1031 exchange, investors should consult with an experienced qualified intermediary, CPA and/or tax or legal professional to determine whether a transaction qualifies and how the rules apply to their individual circumstances.
ProStar Realty does not provide tax or legal advice.
Whether you're preparing to sell an existing investment property or already searching for replacement real estate, ProStar Realty can help you navigate the real estate side of the transaction.
With Arizona real estate experience dating back to 1992, our independent brokerage provides personal guidance throughout the process rather than passing clients through a large team or automated system.
Call or text ProStar Realty at 602-265-4600 to discuss your Arizona real estate needs.
Potentially. For federal 1031 purposes, qualifying real property can generally be like-kind even when the properties differ in type or quality. Eligibility depends on how the properties are held and other requirements, so investors should confirm their specific situation with their tax and exchange professionals.
In a typical deferred exchange, potential replacement property generally must be identified within 45 days after the relinquished property is transferred.
Generally, replacement property must be received within 180 days after transferring the relinquished property or by the applicable tax-return due date, including extensions, if earlier.
A personal residence generally does not qualify simply because it is real property. Section 1031 applies to qualifying real property held for investment or productive use in a trade or business. Individual circumstances can be more complicated, so professional tax advice is important.
No. ProStar Realty provides real estate brokerage services. A qualified intermediary is a separate party used to facilitate qualifying deferred exchanges. We can coordinate the real estate transaction with the professionals involved in your exchange.
It can be helpful to begin planning early because the identification period is limited. ProStar Realty can begin evaluating available Arizona properties based on your goals while you prepare to sell your existing property.