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1031 Exchange 101

Use 1031 exchange for fractional real estate

1031 Exchange Basic Concepts

Fraxioned will work with you and your accounting/legal team to satisfy the requirements under IRS section 1031. We strongly recommend the use of a professional team to ensure that the exchange is not disqualified.

In general terms, you can avoid recognizing a gain on a property if there is an exchange for another like-kind property and if you meet the other conditions from the IRS.

Proceeds from your asset sale 1031

Proceeds from the sale

Taking control of the proceeds from your asset sale before the exchange is complete will likely disqualify the entire transaction and make the gain immediately taxable. The best way to avoid the receipt of proceeds is to use a qualified intermediary to hold those proceeds until the exchange is complete.

Capital Gains

Taxes on capital gains are as follows:

  • Short-term capital gains are taxed at the same tax as ordinary income, currently from 10% to 37%.
  • Long-Term capital gains are taxed between 0% to 20% depending on filing status and the amount of the gain.
Short term capital gains 1031 exchange Fraxioned
Time limits on 1031 exchange 45 days

Time Limits

To have a successful exchange, you must consider these 2-time limits:

  • 45-day limit: you have 45 days from the date you sell the relinquished property to identify potential replacement properties.
  • 180-day limit: the replacement property must be received, and the exchange completed no later than 180 days after the sale of the exchanged property (with some exceptions).

Multiple Replacement Properties

IRS rules allow you to name more than one replacement property. There are 3 rules to consider:

  • You may name up to (3) three replacement properties, so long as you close on one of them within the 180-day period.
  • You can name any number of properties if their fair market value at the end of the identification period does not exceed 200% of the fair market value of the old property as of the transfer date.
  • You can identify as many properties as you like if you purchase 95% of what you identify. After the 45th calendar day, the identifications cannot be changed.

*For more information about how Fraxioned can assist you in your 1031 exchange, contact us at: sales@fraxioned.com

Frequently Asked Questions

FAQ
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What types of properties qualify for a 1031 exchange*?
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Can I do a partial 1031 exchange*?
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What is not allowed in a 1031 Exchange*?
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How would the title be held under a fractioned ownership?
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*Fraxioned Corp and its affiliates do not provide tax, legal, or accounting advice. These FAQs are for informational purposes only, and are not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Fraxioned makes no representations or guarantees regarding the economic benefits to be derived from the purchase or resale of the Interest or rental of the Property.

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