Section 1031 allows taxpayers to defer their capital gains taxes when voluntarily selling their real property. Section 1033 deals with involuntary sales (for example, condemnations, seizures, or losses caused by theft or destruction). In this article, we’re going to talk about the 1033 exchange and when it can be used to defer real estate taxes.
Section 1033 of the Internal Revenue Code deals with involuntary sale or loss of the property in question. 1033 exchanges allow you to retain your sales proceeds, and you have a much longer time period to complete them (2-3 years). Compare that to a 1031 exchange where you have 180 days total to complete your exchange and you are required to roll your sales proceeds into your replacement property.
1033 exchanges are not as common as 1031 exchanges because of the high benchmarks you need to reach, but they are more favorable to the taxpayer. In general, if you are eligible for a 1033 exchange, you should try to do one. If not, then a 1031 exchange is a great alternative.
Like-Kind Exchange Company in Minneapolis
At Commercial Partners Exchange Company, we focus exclusively on like-kind exchanges of real estate under section 1031 of the Internal Revenue Code. Reach out to our 1031 exchange professionals today to learn more about the exchange process and get your 1031 exchange started. Your qualified intermediary can help you through all the elements of your exchange by answering your questions, making advisements, and preparing your 1031 exchange documents. Our main office is located in downtown Minneapolis but we help clients across the country with their exchanges.