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1031 Tax Deferred Exchange

Florida Capital Gains Law What You Need to Know About the Florida 1031 Exchange More than a decade ago, the IRS released rules on deferred exchanges known as Section 1031. Under the Florida 1031 exchange law, real estate owners held for investment or used in a trade or business can swap their property tax-free for "like-kind" real estate. Qualifying like-kind real estate includes apartments, rental houses, retail properties, and office buildings, among others.

Florida 1031 exchanges are made for those who want to keep investing in real estate and avoid paying high taxes upon a property sale. Saving on capital gains tax puts an investor on the road to wealth. That is why a 1031 Exchange is so important: without it, an investor pays taxes every time they move from one investment property to another. If you're buying or selling real estate, our Florida title company can help clearly explain the ins and outs of the Florida 1031 exchange, so you'll have all the facts.

Get in touch with a title agent at Key Title & Escrow today to schedule a consultation with one of our trained Florida capital gains law real estate experts or learn more about our title and escrow services!

Common 1031 Exchanges In Florida

Also referred to as a Starker exchange or like-exchange, 1031 exchanges allow investors to trade real properties for other ones without immediately incurring any capital gains taxes. However, this only applies if the exchange is completed within a set period and the profit from the transaction is reinvested in a like-kind property of equal or greater value. The following are some of the most common 1031 exchanges in the state of Florida. Contact our title insurance company to learn more.

Delayed Exchange

Delayed exchanges are the most straightforward and commonly used type of 1031 exchange in Florida and all across the country. In a delayed exchange, you sell your property and then later purchase a different property. This kind of exchange includes a 45-day identification period and a 180-day completion period.

Reverse Exchange

As implied by their name, reverse exchanges are essentially delayed exchanges but are conducted in reverse. In a reverse exchange, you would first purchase a replacement property then sell the original property. These exchanges are less common than delayed exchanges because property owners must use cash for the purchase.

Simultaneous Exchange

Simultaneous exchanges are the oldest kind of 1031 exchange and can be slightly risky. In a simultaneous exchange, the sales of both properties must close at the same time. Any delay could disqualify the exchange and result in full taxation.

Improvement Exchange

A construction or improvement exchange permits individuals to improve their replacement property using the profits from the original property sale. At the same time, a qualified intermediary holds the property deed in a trust for up to 180 days.

Eligible 1031 Exchange Property Types

While certain common kinds of property types were mentioned above, the following is a more comprehensive list of property types eligible for 1031 exchanges in Florida: apartments, office buildings, vacant land, shopping malls, golf courses, storage facilities, convenience stores, gas stations, rental properties, conservative easements, hotels and motels, parking lots, condominiums, nursing homes, medical practices, trailer parks, and communication towers.

Don't see your property on the list? Contact our title and escrow company to find out if your property is eligible for a 1031 exchange!

Frequently Asked Questions

What Is A "Like-Kind" Property?

In an exchange of real property, per IRS Code Section 1031, any property considered to be real property under state law is "like-kind" with any other property also deemed real property under state law. Simply put, "like-kind" means that the nature or character of the property must be similar in nature or character to the real property.

How Much Property Must I Acquire In An Exchange?

The value of a replacement property acquired through an exchange must be equal to or exceed the value of the property being relinquished. Additionally, the amount of equity and the value of loans secured by the property relinquished in the exchange must be equal to or less than the amount of equity and loans secured by its replacement property counterpart.

What Is A Qualified Intermediary?

A qualified intermediary for 1031 exchange (Q.I.), also referred to as an accommodator or facilitator, is a person or entity that facilitates 1031 tax-deferred exchanges. A qualified intermediary sells the property on your behalf, buys the replacement property, and then transfers the deed to you upon closing.
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