The Starker (1031) Exchange - Home Buying process provided by Helene Cass and Team specializing in McDowell Mountain Ranch
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Financing Your Purchase > The Starker (1031) Exchange

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 that property.

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 rental unit.

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.


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