1031 EXCHANGE
posted Mar 12th, 2023
with Anthony Alosi, the Senior Vice President and Regional Manager for the West Coast & Hawaii
First American Exchange Company
brought us by First American Title Angie Tang
For internal use only
Understanding 1031 Exchanges
Key Insights for Real Estate Investors
A 1031 exchange is a powerful financial tool for real estate investors, enabling them to defer capital gains taxes by reinvesting proceeds from the sale of an investment property into another property of equal or greater value. Anthony Alosi, Senior VP of 1031 Exchange First America for the West Coast, emphasizes that the process, while involving multiple parties (agents, escrow, CPAs), should not be overly complicated. The key is understanding the essentials: the exchange must involve investment properties, and it must meet the IRS’s timing rules—identify new properties within 45 days and close within 180 days. Unlike a sale, a 1031 exchange defers taxes, allowing investors to preserve wealth and potentially grow their portfolios. The exchange works for all states, and a step-up in basis allows heirs to inherit properties tax-free. Investors should stay aware of the rules around "boot" (taxable leftover cash) and ensure that personal use properties do not qualify. Additionally, the process involves careful planning with financial experts to maximize benefits and avoid pitfalls.
Top 5 Takeaways:
1031 exchanges defer capital gains taxes on investment properties.
Properties must be of equal or greater value for full tax deferral.
Investors have 45 days to identify and 180 days to close.
Step-up in basis benefits heirs, potentially avoiding capital gains.
The process involves multiple professionals like agents, CPAs, and 1031 companies.
5 Best Practices:
Always ensure the exchange is set up before the sale closes.
Consult with a CPA to define intent and manage tax strategy.
Diversify investments with multiple properties when feasible.
Use the 3-property rule or 200% rule for identification flexibility.
Engage professionals early in the process to avoid timing missteps.
Top 10 FAQs:
What is a 1031 exchange?
A 1031 exchange allows investors to defer capital gains taxes by reinvesting proceeds into another investment property.
How long do I have to complete a 1031 exchange?
You have 45 days to identify potential replacement properties and 180 days to close on one or more of them.
Can I use a 1031 exchange for my primary residence?
No, 1031 exchanges apply only to properties held for investment or business purposes, not primary residences.
What happens if I don’t buy a property within 180 days?
The exchange fails, and you'll owe capital gains taxes on the sale.
Can I sell and buy properties in different states?
Yes, 1031 exchanges are federal and apply across all U.S. states.
What is "boot" in a 1031 exchange?
Boot refers to any leftover cash or non-like-kind property in the exchange, which is subject to taxes.
Can I exchange one property for multiple properties?
Yes, as long as the total value of the new properties equals or exceeds the value of the sold property.
Is there a limit on how many times I can do a 1031 exchange?
No, you can perform 1031 exchanges repeatedly to defer taxes indefinitely.
What happens to capital gains taxes when I pass away?
Your heirs receive the property at a stepped-up basis, meaning they can inherit it without owing capital gains taxes.
Can I take cash out during a 1031 exchange?
Yes, but it will be considered boot, and you will pay taxes on the amount taken out.
Workshop announcement
Mastering the 1031 Exchange: A Comprehensive Class with Anthony Alosi
Navigating the complexities of real estate investment strategies is crucial for maximizing returns and minimizing taxes. One of the most powerful tools at a real estate investor's disposal is the 1031 exchange. To demystify this topic and provide in-depth understanding, Angie Tang from First American Title, together with the KW Pasadena Education Committee, is excited to present a specialized class on the 1031 exchange, featuring industry veteran Anthony Alosi.
Anthony Alosi
Anthony Alosi, the Senior Vice President and Regional Manager for the West Coast & Hawaii at First American Exchange Company, brings an unparalleled depth of knowledge to this session. With an impressive tenure of 28 years at First American, Anthony oversees all operations for First American Exchange along the West Coast, including the diverse markets of Alaska and Hawaii. As the National Reverse Exchange Team Director, his expertise encompasses a wide range of complex exchange transactions, making him the perfect guide for those looking to deepen their understanding of 1031 exchanges.
Why This 1031 Exchange Class?
The 1031 exchange, while offering significant tax advantages, can be a labyrinth of rules and deadlines. Anthony Alosi will break down the essentials, offering clarity on:
The Basics of 1031 Exchange: Understand what a 1031 exchange is, its benefits, and who can utilize it.
Types of Exchanges: Explore the various types of exchanges, including delayed, reverse, and improvement exchanges, and how they can suit different investment strategies.
Critical Timelines and Rules: Learn about the strict timelines and key rules that govern 1031 exchanges to ensure compliance and success in your real estate investments.
Advanced Strategies: Anthony will share insights into advanced strategies, including how to leverage 1031 exchanges in complex investment scenarios and the role of the reverse exchange.
Who Should Attend?
This class is designed for real estate professionals, investors, financial advisors, and anyone interested in expanding their real estate investment toolkit. Whether you're new to 1031 exchanges or looking to sharpen your skills, Anthony’s insights will prove invaluable.
Event Details
Brought to you by Angie Tang of First American Title and the KW Pasadena Education Committee, this class is a must-attend for those looking to leverage 1031 exchanges effectively. Stay tuned for details on the date, location, and how to secure your spot.
Elevate Your Investment Strategy
Join us for this in-depth class with Anthony Alosi and transform your approach to real estate investment. The knowledge gained here will equip you with the tools to navigate 1031 exchanges with confidence. Allowing you to help your clients understand opening up new avenues for investment growth and tax savings. Don't miss this opportunity to learn from one of the industry's best and elevate your real estate investment strategy to new heights.
