Understanding the 1031 Exchange Process As per IRC §1031, a valid property exchange is the selling of an investment property with the intention of reinvesting the profits into a new property thus deferring capital gains taxes. These transactions allow investors to continue investing in other properties without losing their investment equity to taxes. If you exchange investment property exclusively for “like-kind” investment property, there is no immediate tax liability thereby making the exchange a desirable option for investors eager to keep the property’s equity for re-investment. With a 1031 exchange, the replacement property must be identified within 45 days and acquired within 180 days of the sale of the relinquished property. To be eligible for a safe harbor tax deferral, the proceeds must be held by a qualified intermediary between the time of the sale of the relinquished property and the purchase of the replacement property. A 1031 exchange is a three-step process and one in which a Peak 1031 Exchange, Inc. specialist will guide you through:
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