Basic 1031 Exchange Rules:
Internal Revenue Code Section 1031 permits the deferral of capital gains taxes on the sale of property held for investment or productive use in a trade or a business. In a Forward Delayed Exchange, the most common type of exchange, property is sold (Relinquished Property), and the proceeds are used to purchase replacement property (Replacement Property) within certain timelines. To qualify for safe harbor tax deferral, the sale proceeds must be held by a Qualified Intermediary between the sale of the Relinquished Property and the purchase of the Replacement Property. §1031 permits deferral of federal capital gains taxes (15%), depreciation recapture (25%), and state taxes (generally 8% to 9% where applicable. The state tax in California is currently 9.3%).

For more information regarding 1031 Exchange, please see the following:







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