Colorado Tax Free Exchange Package

A qualified intermediary is a person or company that agrees to facilitate the 1031 exchange by holding the funds involved in the transaction until they can be transferred to the seller of the replacement property. The qualified intermediary can have no other formal relationship with the parties exchanging property.

A successful 1031 exchange isn't a do-it-yourself project. You must follow IRS rules to realize the tax deferral benefits, and you'll need a middle person, called a qualified intermediary (QI).

The 1031 is named for section 1031 of the IRC tax code. It says that you can exchange a business or investment property for a like-kind property.Usually, a 1031 exchange in Colorado occurs when you sell an existing property, and purchase a replacement of equal or greater value within 180 days.

As mentioned, a 1031 exchange is reserved for property held for productive use in a trade or business or for investment. This means that any real property held for investment purposes can qualify for 1031 treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family residence.

Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind.

Normally the IRS does not allow you to conduct a 1031 exchange with your primary residence. That's because the home that you live in isn't being used as an investment property or being held for business purposes. Instead, your primary residence is used to provide shelter for your family.

Trade up in real estate value with one or more replacement properties. Reinvest all of your 1031 exchange proceeds from the relinquished property into the replacement property.

A 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.

The IRS statute requires that you use a qualified intermediary (QI) to perform your 1031 exchange. While it is possible for an attorney to provide this service, it doesn't have to be an attorney and it can't be an attorney you have utilized for any other matters.