A reverse 1031 exchange is a strategic real estate transaction that allows investors to acquire a replacement property before selling their relinquished property, effectively reversing the standard order of a 1031 exchange. This article dives deep into the often-overlooked strategy of reverse 1031 exchanges, shedding light on their mechanics and their remarkable benefits. Mechanics of the Reverse 1031 Exchange The mechanics of a reverse 1031 exchange involve a carefully orchestrated series of steps. First, the investor identifies a suitable replacement property and engages an Exchange Accommod ..read more

Like-Kind Exchange Within the United States Under IRC §1031, U.S. taxpayers can freely exchange investment properties within the 50 states and the District of Columbia. This means that a property owner in California can trade their property for a similar one in New York without triggering capital gains tax. This rule provides a significant advantage for investors looking to adjust their real estate holdings to better align with their financial goals. The Intricacies of Foreign Real Property However, when it comes to foreign real property, the rules are not as straightforward. Foreign real prop ..read more

Underperforming real estate assets encompass a wide range of properties, including those in dire need of maintenance or updates, properties with high vacancy rates, or those situated in unfavorable locations. However, savvy investors can leverage the power of 1031 Exchange strategies to unlock incredible opportunities for selling these assets and strategically reinvesting in more promising properties. For example, a growing trend has emerged among owners of shuttered shopping malls who seek to explore 1031 strategies. By diversifying their investments and venturing into new opportunities, thes ..read more

To have a fully tax-deferred 1031 exchange, an exchanger must: (1) buy replacement property of equal or greater value; and (2) use all the net proceeds from the relinquished property towards their replacement properties. For a variety of reasons, sometimes exchangers cannot (or choose not) to meet one of these requirements. For example, an exchanger may decide to take some cash from the sale of their relinquished property to use for some other purpose; or they find the “perfect” replacement property but it is of lower value than their relinquished property. Such exchanges can still be successf ..read more

When purchasing real estate, buyers typically include an earnest money deposit with their offer to the seller. The deposit may be refundable or non-refundable, depending on the conditions of the purchase agreement. In general, the delivery of the deposit serves as evidence of the buyer’s intention to buy the property and is usually refundable. However, for a myriad of reasons, buyers will sometime authorize release of the earnest money deposit to the seller, also known as a “non-refundable” deposit or “early release.” In a tax-deferred exchange under Internal Revenue Code Section 1031, the sel ..read more

For qualified California residents and business owners, the next several months of 2023 are one of the best times in recent memory to begin a 1031 exchange. The reason for this is the recent 1031 exchange deadline extensions issued by the IRS, which essentially allow qualifying California taxpayers to extend any exchange deadline that falls after January 8, 2023 out to October 16, 2023. This means that for the next several months, qualifying taxpayers can initiate a 1031 exchange that has a much longer identification period. For example, if a taxpayer closes on the sale of their relinquished p ..read more

The IRS has issued further postponements of the 45-day and 180-day deadlines as follows: New California Postponement for disaster beginning December 27, 2022: Alameda, Butte, Calaveras, Colusa, Contra Costa, Fresno, Glenn, Humboldt, Los Angeles, Marin, Mendocino, Merced, Monterey, Placer, Sacramento, San Benito, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Siskiyou, Sonoma, Trinity, Tulare, Ventura, and Yolo counties. The disaster began on December 27, 2022. The General Postponement date is OCTOBER 16, 2023. Update to California Postponement for disaster beg ..read more

The IRS has issued a disaster relief notice for the state of California relating to the severe winter storms, flooding, and landslides that began January 8, 2023. Counties in which Affected Taxpayers are entitled to relief: Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama ..read more

When engaging in a 1031 Exchange, the taxpayer must identify their replacement property(ies) within 45 days of closing on the sale of their relinquished property. This requirement raises a myriad of questions, such as: How exactly do I identify a replacement property? How many properties can I identify? Can I amend my identification list? Must I satisfy all 3 rules of identification? Which rule is best for me to use? We will attempt to address the answers to all of these questions and more below. There are three (3) rules of identification, and the taxpayer must comply with one of the followin ..read more

If the sale of your Relinquished Property closed on or between October 18, 2022 and December 31, 2022, the standard 180-day exchange period will be shortened. However, you can file for a tax extension by April 15, 2023 to obtain a full 180-day exchange period. If you do not file for an extension, the last day to close on your Replacement Property(ies) will be April 15, 2023. Internal Revenue Code § 1.1031(k)-1(b) (ii) – offers the following explanation: “(ii) The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of ..read more