“Hi Gary. My wife and I want to sell our rental condo in Mission Valley and buy a triplex or fourplex in North Park. I know I can avoid taxes by doing a 1031 exchange, but I dont know how they work. Can you enlighten me? “
There are 3 common kinds of IRC 1031 tax-deferred exchanges: concurrent, delayed, and reverse.
A CONCURRENT exchange means you close escrow on your sale (“downleg”) and your purchase (“upleg”) at the same time.
More common is the DELAYED exchange where you close escrow on your sale first, then close on your purchase later. You must “identify” your upleg within 45 days of closing your downleg. And you must close within 180 days of closing your downleg. These exchanges cost under $1,000.
Less common is the REVERSE exchange, where you close your upleg before your downleg. These require greater financial resources as you won’t yet have cash from the sale to complete your purchase. Reverse exchanges cost about $5,000.
There are a few more rules you must follow when you do an exchange that I’m happy to discuss with you over the phone or in person. Once you know the rules, they’re actually very simple and easy to follow.
Just call or text me at 858-457-5368 and we’ll set a time to talk…