Frequently Asked Questions & Answers Pertaining
To “1031” Deferred Exchanges
Russell J. Gullo, CCIM, CEA,
has authored numerous Real Estate Exchange manuals, such as the “A B C’s Of
Real Estate Exchanges”. Using examples from his manual, Russell will answer
some of the frequently asked questions.
Q: WHAT
IS THE PRIMARY BENEFIT OF A DEFERRED Exchange?
A: The
primary benefit for owners disposing of business or investment held property, is the
opportunity to “PAY NO TAX”.
Q: WHAT IS A DELAYED
Exchange?
A:
You surrender your relinquished property at one time and acquire the
new replacement property, no later than 180 days from the closing of the relinquished
property. R. J. GULLO & CO., INC., specializes in this type of Exchange. Today,
this is referred to as a deferred Exchange.
Q: HAS
THIS BEEN AVAILABLE VERY LONG?
A:
YES! It goes back to the early 1900's when the first Exchange laws were enacted. Changes have been
made, but it wasn’t until 1991, when the Regulations were made available, that this
concept of disposition became very popular.
Q: HOW
MUCH TIME DO I HAVE?
A: You
will have 45 days from the day you close your relinquished property (escrow) to identify
the candidate(s) you wish to acquire, this is known as the "Identification
Period”. You will then have an additional 135 days in which to close your replacement
property purchase (escrow). You can not exceed the maximum 180 day time period for the
Exchange to take place, this is known as the "Exchange Period”.
Q: CAN I
CHANGE A PENDING CONTRACT OF SALE TO AN Exchange?
A: YES! By bringing in a
professional, qualified intermediary anytime prior to the closing of the relinquished
property.
Q: CAN I
ACQUIRE MORE THAN ONE PIECE OF PROPERTY?
A: YES!
You can come out of one relinquished property and acquire two or three replacement
properties, it doesn’t matter. As long as the value that you give up is at least the
value that you go back into, there wouldn’t be a taxable event.
Q: CAN I
TRADE OUT OF MANY SMALLER PROPERTIES INTO A LARGER ONE?
A: YES!
The value that you come out of in the relinquished property has to be the same value, or
greater, in the replacement properties.
Q: MY
RELINQUISHED PROPERTY IS IN NEW YORK. CAN I EXCHANGE IT FOR PROPERTY IN FLORIDA?
A: YES!
Or vice versa, or anywhere in the U.S.A.
Q: CAN MY
BROTHER BE THE QUALIFIED INTERMEDIARY?
A: NO!
A qualified intermediary must be a non-related party, and cannot be anyone that has or has
had an “agency relationship” with you, such as your Accountant/CPA, Lawyer, Real
Estate Agent/Broker, an employee or yourself. The professional, qualified intermediary
needs to be someone who is trained to facilitate this type of a transaction.
Q: IF YOU
WANT TO USE R. J. GULLO & CO., WHEN MUST YOU KNOW?
A: The
earlier the better. Certainly a must before disposing of your relinquished property, or
the purchase of the replacement property in a REVERSE Exchange.
Q: CAN I
PURCHASE THE REPLACEMENT AND THEN DISPOSE OF THE RELINQUISHED PROPERTY?
A: YES!
Today, we have the opportunity to have what’s called a “Reverse Exchange”
performed, but the structuring of this type of transaction is critical. It’s a must
that you speak with R .J. GULLO & CO., INC., as your professional, qualified
intermediary, before disposing of the relinquished property, or purchasing the replacement
property.
Q: CAN I
(Exchange) AN APARTMENT HOUSE WORTH $500,000, ACQUIRE VACANT LAND FOR $200,000 AND USE THE
OTHER $300,000 TO BUILD A NEW APARTMENT HOUSE ON THE VACANT LAND?
A: YES!
The professional, qualified intermediary plays a very important part in the structuring of
this type of a transaction, known as a “Build-To-Suit” Exchange.
Q: CAN I
IMPROVE AN EXISTING BUILDING THAT’S ACQUIRED AS A DEFERRED Exchange?
A: YES!
You can perform what’s called an “Improvement Exchange”. The professional,
qualified intermediary plays an important role in the structuring of this type of an
Exchange transaction.
Q: CAN I USE THE PROCEEDS OF MY RELINQUISHED PROPERTY TO PAY DOWN A
MORTGAGE ON ANOTHER PROPERTY THAT I ALREADY OWN, AND HAVE THE
TRANSACTION TREATED AS AN EXCHANGE?
A: NO!
You need to acquire a replacement property for at least the value that you disposed of in
order to PAY NO TAX, and it has to be a property that you don’t already own.
Q: WHAT
ARE TENANT IN COMMON (TIC) EXCHANGES?
A: Click here for the answer!
Q: CAN I
HAVE AN EXCHANGE PERFORMED ON PERSONAL PROPERTY?
A: YES!
Section “1031” of the Internal Revenue Code pertains to real property as well as
personal property. There are separate Regulations that address personal property
Exchanges. Some examples of personal property can include: equipment, furniture, aircraft,
vehicles, vessels, livestock, and coins.
Q: HOW
LONG HAS R. J. GULLO & CO., INC., BEEN DOING DEFERRED EXCHANGES?
A: R.
J. GULLO & CO., INC., has over 25 years of experience as qualified intermediaries. The
president of the company, who handles every transaction, Russell J. Gullo, CCIM, CEA, is
considered one of the leading authorities in the United States.
For an immediate “FREE
PHONE CONSULTATION” with Russell J.
Gullo, CCIM, CEA
on how you can PAY NO TAX call:
1- (866) R J GULLO (754-8556)
