Section 1031 Exchanges for Real Estate Investors

When a real estate investor sells real estate, a capital gains tax is recognized, along with a tax on deprecation recapture. The regular capital gains tax, deprecation recapture, and any applicable state tax can often result in a tax liability in the 20% to 25% range for the sale of real estate. (If the real estate has been held for less than 12 months, all of the gain will be taxed at much higher short term capital gains rates.)

A Section 1031 exchange, named for the applicable section of the Internal Revenue Code (also known as a Starker Exchange, Tax Free Exchange, or Like-Kind exchange), allows an investor to defer all tax on the sale of real estate if the real estate is replaced with other real estate pursuant to a detailed set of rules.

The replacement property must be identified within 45 days of the sale of the relinquished property. (1) The replacement property must be purchased within 180 days of the sale of the relinquished property. (2) The replacement property must have a purchase price at least as great as the relinquished property, otherwise some tax will be recognized. (3) All of the cash proceeds from the sale of the relinquished property, less any debt repayment and expenses of the sale, must be reinvested in the replacement property. (4) All of the cash proceeds from the sale of the relinquished property must be held by a Qualified Intermediary, which is a person or institution with whom the investor has not recently conducted other business. The investor must not have any access to the cash while it is being held. (5) The titleholder of the relinquished property must be the same as the purchaser of the replacement property. (6) The sale or purchase of a partnership interest does not qualify for a Section 1031 exchange, except under a few limited set of circumstances. (7) The relinquished property cannot have been classified as inventory, such as condominiums built by the investor, or lots in a subdivision that was subdivided by the investor.

If these rules are followed, real estate investors can sell current real estate holdings and replace them with other properties. A Section 1031 transaction is an excellent way for a retiring real estate investor to convert actively managed properties into passive properties, such as triple net leased properties.

Posted by Dana Schatzl on February 15, 2009 at 10:13 AM

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Local Information for Braintree, MA

Latitude: 42.209555 -- Longitude: -70.999683

ZIP Codes for Braintree, Massachusetts	02184 02185
Area Code for Braintree, Massachusetts	781
Time zone for Braintree, Massachusetts	EST

Other Area Cities: Braintree, MA Boston, MA Cambridge, MA Milton, MA Needham, MA Norwell, MA Norwood, MA Quincy, MA Randolph, MA Somerville, MA Weymouth, MA Brockton, MA Chelsea, MA Dedham, MA Everett, MA Sharon, MA

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Braintree was founded on land first colonized in 1625 by Captain Wollaston, and initially named Mount Wollaston. Under the rule of Thomas Morton it was renamed Merry Mount. The area was resettled and incorporated as the town of Braintree, named after the English town of Braintree in 1640, on land which is now part of the current town of Braintree, from which Randolph, Holbrook, the City of Quincy, and part of Milton were split off. Braintree is the birthplace to Presidents John Adams, and John Quincy Adams, as well as statesman John Hancock and General Sylvanus Thayer. Braintree is also the site of the infamous Sacco and Vanzetti murders as well as the retirement home of the co-inventor of the telephone Thomas Watson (See Watson Park). -- Source: Wikipedia.com

Massachusetts 2000 Census Population Profile Map

	Braintree	Massachusetts	United States
Population	33,698	6,349,097	281,421,906
Median age	40	36.5	35.3
Median age for Male	38.2	35.4	34
Median age for Female	41.8	37.7	36.5
Households	12,600	2,443,580	105,480,101
Household population	32,889	6,127,881	273,643,273
Average household size	2.61	2.51	2.59
Families	8,877	1,576,696	71,787,347
Average family size	3.16	3.11	3.14
Housing units	12,921	2,621,989	115,904,641
Occupied units	12,600	2,443,580	105,480,101
Vacant units	321	178,409	10,424,540

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Section 1031 Exchanges for Real Estate Investors

Local Information for Braintree, MA

Latitude: 42.209555 -- Longitude: -70.999683

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