RE/MAX Real Estate of Bentonville hosted a workshop today (Thursday, April 20, 2017) with Attorneys Conner McNair and Matthew Mitchell presenting. The topic was focused on explaining the complexities of a 1031 exchange.
What is a 1031 exchange?
A 1031 Exchange is a real estate transaction that allows you to defer taxes when you exchange "like-kind" business or income, but primarily used in the context of real estate.
IRC Section 1031 (a)(1) states:
“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”
Matthew Mitchell and Conner McNair spoke about 1031 exchanges at Re/Max Real Estate Workshop.
The rationale behind Section 1031, Conner explains, is that the taxpayer has, essentially, continued to hold the "same" property, so recognizing gain or loss is inappropriate.
Basic Requirements for a 1031 exchange are:
- Taxpayer holds both properties (property relinquished and property received) for a business or investment purpose
- Properties are “like-kind”
- Properties not excluded property
- An “exchange,” which includes both "forward" and "reverse" exchanges
Conner joined the firm in 2010 and practices in the Mergers and Acquisitions Practice Group. Conner focuses his practice on advising clients through mergers, acquisitions, divestitures and real estate transactions and providing advice and counsel regarding general corporate and partnership tax matters for small to mid-sized businesses.
Matt is an associate in the Mergers and Acquisitions Practice Group. Matt concentrates his practice in the areas of banking, corporate and securities, and real estate. Matt represents clients in a wide range of corporate and transactional matters, including entity formation and reorganization, corporate governance, mergers and acquisitions, securities offerings, and commercial contract drafting and negotiation.
For more information or if you have further questions about taxation and tax planning, please contact one of our Tax Planning Attorneys. Click here for more about this practice group and a list of attorneys.