1031 and 721 Exchanges

Property owners can build wealth for themselves and their heirs by using provisions in the U.S. tax code created to incentivize real estate investment:

• Section 1031 of the U.S. tax code allows investors to defer taxes on the gain from the sale of investment property when the proceeds from such sale are directly reinvested into a “like-kind” real estate investment and certain other conditions are satisfied. A specialized escrow agent, called a Qualified Intermediary, must be engaged to facilitate the exchange of sale proceeds, before closing on the sale of the investment property.
• Section 721 of the U.S. tax code allows investors to exchange an interest in an investment property for an interest in an operating partnership owning numerous properties without recognizing a taxable gain, if certain conditions are satisfied. A 721 exchange is often referred to as an “UPREIT”.