5 Times You Should Think About Hiring a Tax Advisor

The Basics of a 1031 Exchange

A 1031 exchange - named for Section 1031 of the Internal Revenue Code - allows real estate investors to defer capital gains taxes when selling an investment property, provided the proceeds are reinvested in a "like-kind" property within specific timeframes. The investor has 45 days from the sale of the relinquished property to identify replacement properties, and 180 days to close on the replacement. When executed correctly, 100% of the equity can be rolled into the new investment with no immediate tax liability.

Common 1031 Exchange Mistakes to Avoid

The IRS rules governing 1031 exchanges are strict, and mistakes can be costly. Common errors include missing the 45-day identification deadline, failing to use a qualified intermediary (which is required - the seller cannot touch the proceeds), identifying too few or too many replacement properties, and failing to meet the like-kind requirement. Working with an experienced 1031 exchange attorney from the beginning of the transaction prevents these costly mistakes.

Types of 1031 Exchanges

While the simultaneous exchange (selling and buying on the same day) is the simplest form, most 1031 exchanges are deferred exchanges where the replacement property is acquired after the relinquished property is sold. Reverse exchanges (acquiring the replacement property before selling the relinquished property) are also possible but more complex. Build-to-suit exchanges allow the investor to use exchange proceeds to construct or improve the replacement property. Each type has distinct requirements and considerations.

Ohio Real Estate and 1031 Exchanges

Ohio real estate investors have used 1031 exchanges to build significant wealth while deferring substantial tax liabilities. The Cincinnati metropolitan area - including Hamilton County, Warren County, and Clermont County - offers a strong market for investment properties. Whether you are exchanging a rental property, commercial real estate, or vacant land, Wolterman Law Office provides the legal guidance to ensure your exchange is structured correctly and complies with all IRS requirements.