What is a 1031 or Starker exchange?
A 1031 exchange occurs when all of the equity and debt from the sale of a property (called the relinquished property) are reinvested into another property (called the replacement property). Upon sale of the relinquished property an unrelated 3rd party called a qualified intermediary (QI) must hold the proceeds. The investor has 45 days to name up to three different replacement properties and 180 days to close on the replacement property. If completed successfully and within the mandated time frames, the process allows the investor to defer all state and federal capital gains tax as well as recapture tax.* Question:I am planning on selling an apartment building; do I have to buy another apartment building? Answer: No. The tax code establishes “like-kind property” as the requirement for reinvesting. However, different asset classes of real estate all qualify as “like-kind” to one another. For example, you can sell an apartment building and buy an office building, industrial building, raw
