​FISHER Advisors  LLC

Business Intermediary & 1031 Excgange

​​​​WHAT IS A 1031 EXCHANGE?


Internal Revenue Code (IRC) Section 1031 provides an excellent strategy to acquire a cash-flowing passive investment property from the deferral of capital gains tax in the sale of your business with its related real estate by deferring payment of capital gains tax which might otherwise be owed from the sale. Exchanging defers the realization of the capital gains tax, leaving the property owner with substantially more proceeds with which to purchase a replacement property i.e., a passive cash-flowing income property. The tax code states, "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment purposes if such property is exchanged solely for property of like-kind, which is to be held for productive use in trade or business or for investment purposes." Real estate investors can accomplish virtually any investment objective using Internal Revenue Code §1031, including greater leverage, diversification, improved cash flow, geographic relocation, or property consolidation.




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In the example above, if we factor in the $500,000 exemption for ownership interest by a married couple taxable gain would be $6,500,000​​


​​​HOW DOES IT WORK?
A 1031 Exchange is a three-way exchange in which a qualified intermediary (different from the business intermediary), usually a title company or escrow agent, is used to facilitate the transaction.

The Basic Steps Are

  • Determine client's exit strategy goals.
  • Facilitate sale of business owners real estate component (relinquished property) concurrent with the business sale.
  • Complete due-diligence (see PREPARE), marketing, and sale of the business and related real estate asset.
  • Facilitate acquisition of your replacement property (We can assist with this -at no additional cost- if requested).
  • Complete due-diligence, marketing, and client suitability of asset i.e., passive ownership, work with counsel on proper contract, escrow and exchange aspects.
  • Transfer sale proceeds to qualified intermediary.


  • *Meet 45 day identification requirement with 3-property rule i.e., ID maximum of 3 properties that are;

                                                               - Equal Or Greater In VALUE
                                                               - Equal Or Greater In EQUITY
                                                               - Equal Or Greater In DEBT

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  • Open replacement property acquisition escrow.
  • **Complete exchange within 180 days. Clock starts to run on the date the taxpayer transfers the relinquished property.​​