Can you do a 1031 exchange with a trust?

Properties in a trust can be used as investments and qualify as a 1031 exchange. The rules are generally the same as a basic 1031 exchange. The replacement property must be of equal or greater value than the relinquished property. The property cannot be used as a personal residence of the taxpayer.

What is the 1031 exchange law?

A 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.

What does 1031 exchange stand for in real estate?

Updated Mar 12, 2021 In real estate, a 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. The term, which gets its name from IRS code…

How does an irrevocable trust work in a 1031 exchange?

The primary difference for purposes of 1031 exchange treatment is that an Irrevocable Trust has its own separate tax identification number. Due to this unique attribute, an Exchangor who sells real property in an Irrevocable Trust must acquire replacement property in the same Irrevocable Trust to satisfy the same taxpayer requirement.

What do you need to know about IRS Section 1031?

IRS Section 1031 has many moving parts that the user must understand before attempting its use. There are also tax implications and timeframes that may be problematic. Also, the rule stipulates the 1031 swap like-kind properties and limits the rule’s use with vacation properties. What is Section 1031?

What happens to depreciable property in a 1031 exchange?

Warning: Special rules apply when depreciable property is exchanged in a 1031. It can trigger a gain known as “depreciation recapture” that is taxed as ordinary income. In general, if you swap one building for another building you can avoid this recapture.