The Next Generation of 1031 Exchanges

by David S. Fisher Creative Real Estate Strategies One of my favorite actors is John Wayne. Whether he was chasing the bad guys in the west, defending the Alamo or fighting our enemies in Europe and the Pacific during WW2, John Wayne always seemed to come to the rescue at the last moment.  That’s what I loved about him and I always wanted to do the same. Finally, I can. The only way to defer taxes when selling a property is though 1031 exchanges.  However, there are many limitations with a 1031. That’s why its important to understand the next generation of 1031 exchanges. Wouldn’t it be great if you could transact a 1031 but without the 45 and 180-day periods? Wouldn’t it be great if you could insure that if an exchange failed for any reason, the proceeds would not become taxable to the seller, you could still defer taxes and still buy a replacement property at any time in the future? In a typical 1031, you buy low, sell high and buy high because of the 45-day period. Wouldn’t it be great if there were no time limitations which means that you could wait months or even a year or longer until the market becomes more of a buyers’ market. Wouldn’t it be great if there was a 1031 exit strategy that would allow a landowner who has been able to build wealth by using 1031s in the past could now retire and still defer taxes without buying more real estate and generate a larger retirement income? Wouldn’t it be great if there was a way that if a property had several owners and some wanted to sell and take the money and run and others wanted to defer taxes and buy more real estate, each owner could do their own thing? Wouldn’t it be great when the sale of an amazing high end residential property creates a large tax liability, the sellers could defer that liability for as long as they would like. Section 453 is the next generation of 1031 exchanges. Section 453 has a 20-year track record of successfully deferring the capital gains tax, state tax, depreciation recapture and the Obamacare tax  over 2000 times with the largest transaction being $120 million with a tax deferral of $50 million. Why would you limit yourself with all of the 1031 limitations and the limited situations where a 1031 can be used when the next generation of 1031 exchanges are far more flexible and can defer taxes in far more situations for the benefit of the land owners. It’s like not wanting John Wayne to come to the rescue. No one would want that.  Let us go into more detail how Section 453 may be a better option that a 1031.