Explore an Exchange Strategy That Reflects Your Investment Need
A partial 1031 exchange occurs when an investor completes a qualifying exchange but also receives cash or other value that does not qualify for tax-deferred treatment.
This may allow an investor to exchange qualifying real property while receiving some proceeds outside the exchange. However, the portion received outside the qualifying exchange may result in recognized taxable gain.
How a Partial Exchange Works
The transaction is structured as a 1031 exchange, with the investor receiving qualifying replacement property and potentially retaining some proceeds or other non-like-kind value.
The process generally involves:
- Review the transaction. Evaluate the expected sale proceeds, replacement property value, debt, and other relevant considerations.
- Establish the exchange. Coordinate the exchange agreement and required transaction documents before the sale closes.
- Acquire replacement property. Complete the qualifying acquisition within the applicable exchange deadlines.
- Review the tax implications. Work with your tax advisor to determine whether any recognized gain results from cash or other value received.
Navigating You With Expertise
Aspen Exchange coordinates the exchange process and documentation while working with your advisors to support the intended transaction structure. We encourage investors to review the potential tax implications before closing so they can make informed decisions.
The Partial Exchange Process
Step 1 — Review Your Objectives
Evaluate the anticipated sale proceeds, replacement property plans, liabilities, and the amount you may want to retain.
Step 2 — Establish the Exchange
Engage a Qualified Intermediary and arrange the required exchange documents before closing.
Step 3 — Acquire Replacement Property
Complete the qualifying replacement property acquisition within the applicable exchange period.
Step 4 — Review the Tax Treatment
Work with your tax advisor to determine whether cash or other value received creates recognized gain and how the transaction should be reported.
Why Consider a Partial Exchange
A partial exchange may be considered when an investor wants to reinvest a portion of the sale proceeds while retaining some proceeds for other purposes.
The investor’s objectives, liabilities, transaction structure, and potential tax consequences should be evaluated with qualified tax and legal advisors before proceeding.
How Aspen Exchange Coordinates Your Transaction
Aspen Exchange coordinates the exchange documentation and transaction process while working with the investor and their advisors to ensure the exchange structure reflects the intended transaction.
Discuss your transaction structure and the steps involved in coordinating a partial exchange.
