What is a 1031 Exchange

Scott: I wanted to ask you a question about 1031 law about reinvesting property, like selling an investment property.

Attorney Tom Olsen: Exactly.

Scott: I understand you have to reinvest it.

Tom: Exactly.

Scott: I've been reading up on it, but the question I have is, do you have to apply for that before you sell the property?

Tom: I don't know, but let's bring the listeners up to speed. 1031 exchange is a way for you to sell a piece of investment property and avoid paying capital gains taxes by reinvesting that money into another piece of property and postponing the payment of capital gains to another day.

Scott: Correct.

Tom: Scott, would I know about 1031 exchange is that, number one, you need a 1031 exchange agent. You can never ever touch those proceeds from the sale of property number one. They must be held by your 1031 exchange agent. I believe that you have to identify a piece of property within a period of time after the sale, and then actually close and buy that property within another period of time. Scott, was your question, do you have to identify the property before you sell the old property?

Scott: Yes. Basically, I didn't want to be too late on the process.

Tom: I think the answer to that, you want to double-check me with that, Scott. I think even if you sell property number one, you still have a period of time after that sale and closing to identify a piece of property. You don't have to necessarily have another piece of property in mind.

Scott: Correct.

Tom: Now, Scott, if this is important to you, then you would want to email me. I'll put you in touch with a 1031 exchange agent and he could certainly answer all your detailed questions about it.

Scott: I appreciate that. The email is what?

Tom: Scott, the easiest way to email me is through our website, olsenlawgroup.com.

Scott: Olsenlawgroup.com.

Tom: You got it, Scott.

Scott: Thank you so much. I appreciate it.

Tom: You're welcome, Scott.

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