Comparing 1033 Exchange and 1031 Exchange

1033 Exchange and 1031 Exchange

• 1033 Exchange is involuntary sale of investment property through eminent domain  ( government taking the property for its own use ), destruction or theft and tax payer receives money from insurance company or government.
• 1031 Exchange is voluntary sale of investment property for purpose of buying another investment property equal or higher in price.

• 1033 Exchange does not require the use of QI, qualified intermediary
• 1031 Exchange requires the funds to be placed with QI, qualified intermediary

• 1033 Exchange replacement period ends two years after the close of the first tax year. For business or investment real property the replacement period ends three years after close of the first tax year. Three years does not apply to property sold through destruction or theft.
• 1031 Exchange replacement period ends 180 days after selling of relinquished property.

• 1033 Exchange seller can complete the exchange by making improvement in property already owned.
• 1031 exchange seller is required to purchase a new property.

NNN 1031 Exchange Restrictions:

1. Exchanger has 45 days from the date of the sale of the first relinquished property to identify potential replacement property or properties; and a total of 180 days from the original date of sale to purchase the replacement property or properties;
2. Exchanger must acquire replacement property of equal or greater value, obtain equal or greater debt on the replacement property, reinvest all the net proceeds realized from the sale of the relinquished property, and acquire only like-kind property;
3. Exchanger must own the investment property for at least one year before it can be used for a 1031 Exchange;
4. Exchanger must initiate the 1031 process before closing on the property being relinquished.  Once its closing occurs; it’s too late to utilize the 1031 deferred exchange process;
5. Exchanger may use a vacation house or primary residence for a 1031 exchange as long as the property is reported as a rental or for business use on tax returns for two consecutive years.

For additional information regarding Benefits of Investing in 1031 exchange, 1031 exchange, 1033 Exchange is involuntary, 1031 Exchange replacement, 1031 Exchange Restrictions, 1033 Exchange seller, 1031 exchange seller and Lease Triple Net Properties, please contact NNN Investment Group today.