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CAPITAL IMPROVEMENTS AND SECTION 1031: UNLOCKING VALUE THROUGH GROUND LEASE IMPROVEMENT EXCHANGES

In the complex landscape of real estate investing, 1031 exchanges provide a relatively straightforward avenue for deferring capital gains taxes. Incorporating construction of capital improvements into an exchange can offer additional benefits to a real estate investor in certain contexts, whether the investor has plans to develop a new property for its investment purpose, or needs to find a way to spend all their proceeds from their relinquished property.

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UPCOMING WEBINAR

1031 Exchange Rules

Tuesday, May 21, 2024

10:00 PT / 11:00 MT / 12:00 CT / 1:00 ET

For more information or to register,

click here.

HOUSE FLIPPING AND §1031 EXCHANGES DO NOT MIX -

A PRIMER ON REAL PROPERTY CONSIDERED “HELD PRIMARILY FOR SALE”

House flipping is a common investment strategy for those with the ability and time. We often field client questions asking: “If I’m purchasing this as an investment, why doesn’t it qualify for 1031 treatment?” The answer is found in Internal Revenue Code Section 1031(a)(1), which states that property that is "stock in trade" or "held primarily for sale” is specifically excluded from the benefits of 1031 exchanges. According to the Code, property that is held primarily for sale, whether to customers in the ordinary course of business or otherwise, is not property that is held for investment. That often includes property held by developers or by professionals who are routinely engaged in house flipping.

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YOUR 1031 EXCHANGE TEAM

TED BREITENSTEIN

Business Development Manager

720.357.3505

tbreitenstein@firstam.com

ADRIENNE SALYER

Regional Sales Manager

303.876.1167

asalyer@firstam.com

JANESE PATTERSON

Exchange Manager

Senior Exchange Officer

303.876.1128

japatterson@firstam.com

MITCH MEININGER

Senior Exchange Officer

720.630.3647

mmeininger@firstam.com

PAUL HOLLOWAY

Senior Exchange Officer

720.297.9983

pholloway@firstam.com

TERRI SOUCIE

Senior Exchange Officer

303.876.1138

tsoucie@firstam.com

"I loved working with them. They made it so easy to get things done. I would recommend them to anyone."

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First American Exchange Company, LLC. a Qualified Intermediary, is not a financial or real estate broker, agent or salesperson, and is precluded from giving financial, real estate, tax or legal advice. Consult with your financial, real estate, tax or legal advisor about your specific circumstances. First American Exchange Company, LLC makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, and First American Exchange Company are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.