A Starker Exchange is simply the common name for Internal Revenue Code Section 1031
which was amended by the Taxpayer Relief Act of 1997.
It's also known as a tax deferred exchange which is a process by which an investor
can exchange a property and, as a result, avoid the payment of capital gains taxes
that would ordinarily be due when a property is sold. The properties that are eligible
for such treatment include apartments, offices, rental homes, warehouses, commercial
buildings and even vacant land. In short, anything but your principal residence
or a vacation home.
The term exchange is probably a bit confusing since it seems to imply that two people
would have to meet face to face and agree to swap their properties. However, the
reality is far different. The law permits you to sell your property to any one who
is willing to buy it and then gives you 45 days to identify another like-kind property
that you want to purchase to replace it. You then have up to 180 days to close on
Incidentally, even the definition of like-kind is rather flexible. It doesn't actually
refer to the type of property but only to how it is used (i.e. productive use vs.
investment). So, for example, land held for investment could be exchanged for a
The paperwork to insure that you are in compliance is handled by companies specializing
in this area ("qualified intermediaries") and the actual sale and/or purchase
of properties can be handled by ...well, ME!
Obviously, this subject is too complex to be handled adequately in this forum. However,
if you are interested in investments in real property, it's a topic with which you
need to be familiar.
For specific situations or questions, you should (of course) contact your accountant
or financial advisor. However, if you would simply like a pamphlet that explains
tax deferred exchanges in a bit more detail, please just contact me and I would
be happy to send it out to you.