What does 1031 mean?
Posted by michaelhaddad on February 3, 2008
I noticed under the “Financing” section on the MLS listing it says conventional, cash or 1031. What does 1031 mean?
Brenda Keith, Olympia, WA
Brenda,
1031 refers to Section 1031 of the IRS code which dictates that a rental property can be sold without capital gains being owed as long as the owner reinvests the profits in another rental property. There are certain restrictions that come into play with this type of deal (also known as a Starker Exchange), as the time limits and escrow requirements are strict. When a seller agrees to this (and it’s quite common), it simply means they’re willing to work with the buyer who may be in the process of selling another rental property or who has a strict time requirement to complete the deal to buy the new one.
