Section 1031 of the Internal Revenue Code is one of the single greatest wealth building tools available to investors building their real estate portfolio. Below is a break down of the type of Exchanges to consider.

A 1031 Exchange allows investor to defer the payment of capital gains taxes when selling an investment property and exchanging into another investment property. There are several types of exchanges available to investors depending on how they wish to structure the transaction:

Delayed Exchange is one of the most common methods of exchange, the delayed exchange allows investors to sell a property and then acquire replacement property within 180 days.

Reverse Exchange allows investors to acquire replacement property prior to selling. The reverse exchange can be more complicated however so proper planning is advised.

Construction Exchange allows investors to use exchange proceeds to build on land or improve an existing property.

Simultaneous Exchange is when the relinquished property is sold and the replacement property acquired on the same day, with concurrent closings. The simultaneous exchange is rare and investors should still use an Exchange Accommodator when doing a simultaneous exchange.

One strategy taxpayers have used to avoid paying capital gains taxes has been to convert a rental property into a primary residence and later sell that property to take advantage of the Homeowner’s Exemption.

The Homeowner’s Exemption (Section 121 of the Tax Code) allows a taxpayer to exclude up to $250k, and $500k for married couples, of gain realized on the sale of a primary residence.

For more information on this building, please contact your sales associate Lynn Geyer; 415-517-3179 or lynn@sfcondoprojects.com