For years, investors around the globe have accumulated wealth through the purchase and sale of real property.  With real estate assets generally appreciating in value, one of the limiting factors on the sale of real estate is the realization of gain on the sale and the resulting payment of capital gains taxes.

What is a 1031 Exchange?

Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), taxpayers may defer the payment of capital gains and related federal income taxes on the exchange of certain types of real property.  The exchanged property is sold and the profits realized from the sale are reinvested to acquire “like kind” replacement properties.

What are the requirements to meet a 1031?

There are several requirements to be eligible to participate in a 1031 exchange.  The purchase price of the replacement property must be equal to or greater than the sales price of the exchanged property and the entire amount of equity received from the sale of the exchanged property must be utilized in the purchase of the replacement property.  The exchanged and replacement properties must both be located within the United States and held for investment purposes.  Proceeds received in connection with the sale must be held by a qualified intermediary (QI) and the seller cannot touch or control the funds.  The QI documents must be signed prior to the closing of the sale of the exchanged property.

What is the time frame on a 1031?

In addition to qualifying parameters, there are specified time periods that restrict the process.  The identification of the replacement property must be completed in writing within 45 days after the closing of the sale of the exchanged property and the purchase of the replacement property must be completed within 180 days after the closing of the sale of the exchanged property.

What role does Metonic play in a 1031 exchange?

Metonic has extensive experience in working with exchanging investors to identify replacement properties, including locating new assets to be acquired on behalf of the exchanging investor, identifying current Metonic assets that may be available for sale to an exchanging investor and providing exchanging investors with the opportunity to invest alongside Metonic in existing Metonic assets. In working with exchanging investors, Metonic has experience with:

  1. Acquiring new properties solely on behalf of exchanging investors;
  2. Investing alongside exchanging investors in connection with the acquisition of new properties; and
  3. Pairing up exchanging investors with a limited number of other investors in order to provide a broader range of potential replacement properties.

In completing an exchange transaction, Metonic will work with the exchanging investor and the QI to ensure compliance with all 1031 timing requirements and to complete the transaction in an efficient manner.  After the closing, Metonic will oversee the operations and management of the replacement property, as well as providing investor relations services on behalf of the exchanging investors.

When it comes to 1031 exchange opportunities and disposing of qualified real estate, Metonic serves as a potential resource to all investors.  Over the last several years, Metonic’s 1031 exchange program has proven valuable to a variety of investors who were in need of assistance with tax advantaged solutions.  For more information, do not hesitate to reach out to any of us at Metonic Real Estate Solutions.