Note: We have participated in a large number of 1031 exchanges and usually have several such transactions in escrow at any given time. However, neither Stott Real Estate, Inc. nor any of our agents or employees is licensed to provide either legal or tax advice. Licensed professionals such as attorneys or CPAs should be consulted for legal or tax advice.

NOTE: The information below provides a basic overview of IRC section 1031 tax deferred exchanges. It is not intended to be a guide to such an exchange, as it omits rules and considerations that could impact upon someone actually conducting a 1031 exchange.

Note: The information below uses the terms “old property” for the property being sold and “new property” for the property being purchased. A property can consist of more than one piece of real estate.

Videos on 1031 Exchanges

These  videos are for basic informational purposes.  Neither Stott Real Estate, Inc. nor any of our Agents or Employees are licensed to provide legal or tax advice.  Stott Real Estate, Inc. highly recommends seeking advice from appropriate licensed professionals, such as CPAs or Attorneys.

Frequently Asked Questions About 1031 Exchanges
What is an IRC section 1031 Tax Deferred Exchange?
Why should I participate in an exchange?
What does deferring taxes mean?
What is the exchange value of my property?
Does a 1031 exchange defer Hawaii capital gains taxes as well as Federal capital gains taxes? What happens with HARPTA?
What are the time requirements associated with a 1031 exchange?
What is involved in identifying the new property?
What are the current Federal and Hawaii capital gains taxes?
What is a Qualified Intermediary (QI)?
How do I locate a QI?
What is the cost of a QI?
Why do the proceeds from the sale go to the QI?
I understand that I cannot have access to any funds from the sale of the old property. Could I refinance the old property before I exchange it?
Could I use funds held by the QI for costs associated with the new property like earnest money or having a feasibility study done prior to purchasing it?
What is boot?
Can I do a partial exchange?
What kinds of properties qualify for an exchange?
If I own a property that includes my personal residence and a rental unit, would it qualify for an exchange?
How do I find someone who wants to exchange or trade investment real estate with me?
Can I exchange the old property into a new residence for myself?
Can I defer taxes when I sell my primary residence?
How long do I have to rent a property that I want to use as a future residence?
Can I rent new property to a related party?
Can a related party be involved in the 1031 exchange?
Can I exchange into vacant land and build a house?
Are there any other requirements involved in conducting a 1031 exchange?
Can you do it backwards; i.e., buy the new property first and then sell the old property?
What advice can you provide on locating a new property?
How does the average person afford to buy more expensive investment real estate?
I own one-half of a property with my brother owning the other half with title being in both of our names. He wants to cash his half out while I want to conduct a 1031 exchange with my half. Is this possible?
Could I buy Real Estate Investment Trust (REIT) shares as my new property?
Are there any restrictions on leasehold property?
How do I report a 1031 exchange to the IRS?
Recent Rules
What are the other ways to conduct an exchange?

Some Final Thoughts.

A 1031 exchange is not the right investment tool for everyone. Over the years, we have assisted many owners in making a decision not to conduct an exchange.  Often, all that is required is an estimation of the selling basis, buying basis, and accumulated depreciation. Due to the added complexity from recent tax law changes, we recommend that you speak with a Certified Public Accountant (CPA) or tax attorney prior to deciding on a course of action.  Due to the value of real estate on Oahu, you will likely be pushed into the higher tax brackets if you have owned the investment property for a significant period of time and the resulting tax bill could be costly if you don’t conduct a 1031 exchange.

Contact Us With Any Questions.

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