Page 34 - Home Buyers and Sellers Guide - Hawaii

Old Republic Exchange

WHAT IS A 1031 EXCHANGE?
The Internal Revenue Code (IRC) provides that a taxpayer may sell real property and defer payment of capital
gains tax, if that taxpayer uses the proceeds to acquire a like-kind replacement property.

IRC §1031 provides that neither gain nor loss is recognized if property held for investment or productive use in
trade of business is exchanged for property held for investment or productive use in a trade or business.

Why Exchange?
• Capital gains tax is significant;
• Reinvestment into replacement property allows taxpayers to leverage dollars that would otherwise be spent
on taxes;
• Allows for non-income producing property to be replaced with income-producing property; and
• Allows taxpayer to diversify portfolio and minimize risk.

What We Do
• Act as a Qualified Intermediary (QI), as required by the Treasury Regulations;
• Prepare all documents required for the exchange;
• Consult with your tax advisor;
• Execute closing documents;
• Hold the exchange proceeds to avoid constructive receipt of funds; and
• Coordinate with the closing agents, real estate professional, and tax and legal advisors.

Always consult with your tax advisors. Their advice is essential to a successful tax-deferred exchange. Your tax
professional will establish values, allocate sales and purchase price, and recommend the appropriate structure
for your transaction. Old Republic Exchange does not provide tax or legal advice.

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