1031 exchanges as a commercial real estate investment strategy

Posted by Elena del Valle on January 11, 2012

By Alex Zylberglait
Vice president, Investments
Miami office of Marcus & Millichap

Alex Zylberglait, vice president, Investments, Marcus & Millichap

Photo: Alex Zylberglait

A 1031 exchange, otherwise known as a tax deferred exchange is a simple strategy and method for selling one property, that’s qualified, and then proceeding with an acquisition of another property (also qualified) within a specific time frame. The logistics and process of selling a property and then buying another property are practically identical to any standardized sale and buying situation, a “1031 exchange” is unique because the entire transaction is treated as an exchange and not just as a simple sale. It is this difference between “exchanging” and not simply buying and selling which, in the end, allows the taxpayer(s) to qualify for a deferred gain treatment. So to say it in simple terms, sales are taxable with the IRS and 1031 exchanges are not. US CODE: Title 26, §1031. Exchange of Property Held for Productive Use or Investment.

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