Section 1031 Internal Revenue Service

A 1031 exchange is a way to defer paying capital gains tax on the sale of property under section 1031 of the internal revenue service code.

Section 1031 internal revenue service.

A in general 1 exchanges of property solely for property of a like kind. Irc section 1031 provides an exception. Section 1031 of the internal revenue code allows an owner of investment property to exchange property and defer paying federal and state capital gain taxes 15 20 applicable state taxes and taxes on gain from depreciation 25 and the obama care tax 3 8 when required if they purchase a like kind property following the rules and regulations of the internal. Generally if you make a like kind exchange you are not required to recognize a gain or loss under internal revenue code section 1031.

Fs 2008 18 february 2008. Section 1031 is a provision of the internal revenue code irc that allows business or investment property owners to defer federal taxes on some exchanges of real estate. Internal revenue service regulations. Under section 1031 of the united states internal revenue code 26 u s c.

1031 a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property a process known as a 1031 exchange in 1979 this treatment was expanded by the courts to include non simultaneous sale and purchase of real estate a process sometimes called a. Paragraph 2 d of section 1031 a of the internal revenue code of 1986 as amended by subsection a shall not apply to any exchange of an interest as general partner pursuant to a plan of reorganization of ownership interest under a contract which took effect on march 29 1984 and which was executed on or before march 31 1984 but only if. Like kind exchanges under irc section 1031. D basis if property was acquired on an exchange described in this section section 1035 a section 1036 a or section 1037 a then the basis shall be the same as that of the property exchanged decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange.

Like kind exchanges when you exchange real property used for business or held as an investment solely for other business or investment property that is the same type or like kind have long been permitted under the internal revenue code. Irc 1031 1 1031 a 1 property held for productive use in a trade or business or for investment.