A great way to defer a taxable event is with a 10-31 Exchange. There are four types of exchanges:
1.Delayed Exchange, 2. Reverse Exchange, 3. Simultaneous Exchange 4. The Improvement Exchange.
There are guidelines you must follow with all of these exchanges which may seem confusing. When you have a Qualified Intermediary, they can guide you through the process and you can decide which suites you best.
I am not a QI, however, I know of some excellent ones and I am happy to share with you. There are no Federal guidelines to become a Qualified Intermediary.
You do want to make sure who you chose will give you the best advise and protection. I find the most stressful part of an exchange is finding the replacement properties.
Especially in a market like we have today.
You have 45 days to identify what you want to purchase and you have 180 days to close on it. If none of the homes you identify work and the 45 day threshold is over, you will not be able to add another property.
You also have to exchange like for like. All this really means is investment property for investment property. You cannot exchange a home you live in although talk to your intermediary if you have a “vacation” home or have rented your home out for a period of 14 days for market value.
There are some guidelines that might work for you. I have personally done 10-31 exchanges and I have guided clients as well.
The best advice I can give you is have a good Qualified Intermediary and your account give you advice on what will work for you.
And talk to your Realtor about the market one what expectations you can have for your replacement property and which exchange can work best for you.