Section 1031 exchanges allow someone to trade investment properties on a tax-deferred basis. These transactions donât have to involve identical types of property, so someone can swap an apartment building for a shopping center, or a piece of empty land for an office building. To ensure proper execution of a Section 1031 transaction, the filer should first meet with a business lawyer in Wichita .
Section 1031 transactions were originally designed for someone to exchange properties of equal value, so that neither party in the exchange would have to pay taxes on the properties exchanged. However someone wishing to exchange unequal properties can still do so with the help of a business attorney. Someone who exchanges unequal properties can still make the transaction without having to pay capital gains tax on the difference. However, this person would have to pay cash or assume a mortgage on the bigger property to account for the value difference in the smaller property. In this case, a business lawyer may suggest working with an escrow agent, which turns the transaction into a three-way deal. Once the escrow agent obtains the title to the deed, he or she can then transfer the property back.