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1031 Tax-Free Exchange & Custodial Services

Are you ready to dispose of an asset, but concerned about the tax implications? Section 1031 of the Internal Revenue Code allows owners of certain types of investments to sell one asset and buy another of "like-kind" while deferring capital gains taxes. United Bank Wealth Management Advisors can serve as your Qualified Intermediary to facilitate such an exchange.

What is a 1031 Tax-Free Exchange?

A 1031 Tax-Free Exchange, also known as a tax-free real estate exchange, is for those looking to make real estate investments. In a typical property sale, the owner usually has to pay taxes on their gains. However, in a properly executed 1031 exchange transaction, the realized tax is deferred. These transactions are also referred to as “tax-deferred exchanges” or “like-kind exchanges” and are sanctioned under Section 1031 of the Internal Revenue Code.

The property you subsequently purchase should be of equal or greater value than the property you originally sold. Properties included in this type of deal are vacant land, rental property or any property used for business.

1031 Tax-Free Exchange requirements include:
The IRS requires that you involve a QI to prepare and handle all legal documents for your 1031 exchange. During the process, the QI is required to hold your money, so you do not have access to it.
To defer all of your capital gain tax, the property you purchase must be equal to or higher in value than the one you’re selling.
Your old and new property must be used for business or investment purposes to qualify for a 1031 exchange.
During a 1031 exchange, you must purchase and take title of the new property identical to how your old property was held.
All deadlines must be met to complete your 1031 exchange. You have exactly 45 days from the closing of your sale to provide a list of up to three potential properties you wish to purchase. Your QI must receive this list in writing on or before the 45 day deadline.
The exchange must be completed within 180 days from the first closing date or due date of tax return, including extensions.

As Your Qualified Intermediary

United Bank strongly recommends that you seek tax and legal advice regarding your 1031 Tax-Free Exchange.  As your Exchange Agent, United Bank employees cannot make any guarantees or commitments that the transaction will be recognized as qualifying.  If IRS tax penalties or interest are levied against the client, United Bank will not be liable.

If you would like to learn more about these services, please call us at 770.412.4925 or contact a United Bank Wealth Management Advisor.