1031 exchanges: your experiences/hints? Favorite facilitators? Other thoughts?

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Here's a nice piece from last August, after the most recent tax changes, exploring the growth/pros/cons of 1031 exchanges.

I haven't done one of these yet, but may consider it this year. I was glad to see the article question whether it's worth the hassle in many situations, especially if the property owner's income tax bracket is 15% or lower.

Clearly, for some deals, it would be worth it, but it's too bad you have to bring in 3rd parties, pay their fees, and abide by 45-day limits.

What are your experiences?

DrWu said:

<< Great thread! Finally something I can add value to. <img src="i/expressions/face-icon-small-smile.gif" border=0> >>

Very interesting stuff. What I take away from this, is before selling any investment property that will generate taxable gains, consider the possibility of a 1031 exchange to defer (or even eliminate) the capital gains tax.

Thanks for your reply DrWu. I esepcially agree with you on the usefulness of your #5.

I had heard that someone had to be certified as a 1031 intermediary...I gather from you that isn't accurate, anyone who isn't a relative or business partner can serve in this capacity?

A note on 1031 exchanges and the limitation on selecting a property: When you identify the properties that you may potentially roll your gains into, you CAN identify one of the properties as an over-the-counter LP (if they offer 1031 exchange services). For instance, I might list 4 properties that I'm interested in acquiring, and then an over-the-counter real estate investment limited partnership. If I'm unable to come to terms on any of the 4 properties and I'm nearing the end of my re-invest period, I can at least roll the money into the LP, let that count as my exchange, and avoid the tax hit. It's not ideal (I prefer to do my own property management), but as a fallback, it's nice to have the option.


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