Page 35 - Home Buyers and Sellers Guide - Hawaii

Old Republic Exchange

WHAT IS A 1031 EXCHANGE? SEVEN GREAT REASONS TO 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. While avoiding those steep capital gains taxes are, for most, the primary consideration for engaging in a 1031
tax deferred exchange, there are many other significant advantages to a tax deferred exchange:
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. 1. Replace non-income producing property with income producing property;
2. Diversify property interests for estate planning purposes;
Why Exchange? 3. Replace time-consuming management properties with more easily managed properties;
• Capital gains tax is significant; 4. Exchange into property that can accommodate the taxpayer’s trade or business (e.g. taxpayer who owns
• Reinvestment into replacement property allows taxpayers to leverage dollars that would otherwise be spent apartment complex can trade into manufacturing plant);
on taxes; 5. Exchange fully depreciated property to obtain the benefit of a new depreciation schedule;
• Allows for non-income producing property to be replaced with income-producing property; and 6. Relocation of taxpayer’s business;
• Allows taxpayer to diversify portfolio and minimize risk. 7. Relocation of investment property to accomplish ease of management.

What We Do Turn to the Experts
• Act as a Qualified Intermediary (QI), as required by the Treasury Regulations; Old Republic Exchange is a qualified intermediary that has facilitated over 100,000 exchanges. Old Republic
• Prepare all documents required for the exchange; Exchange is part of the Old Republic Title Insurance Group, which is a wholly owned subsidiary of Old Republic
• Consult with your tax advisor; International (NYSE: ORI), a multi-billion dollar corporation, which ranks among the nation’s 50 largest publicly
• Execute closing documents; held insurance organizations.
• Hold the exchange proceeds to avoid constructive receipt of funds; and
• Coordinate with the closing agents, real estate professional, and tax and legal advisors. Added Security for your Exchange
• $80 million fidelity bond
Always consult with your tax advisors. Their advice is essential to a successful tax-deferred exchange. Your tax • $50 million errors and omissions insurance
professional will establish values, allocate sales and purchase price, and recommend the appropriate structure • Letter of Guaranty from corporate parent
for your transaction. Old Republic Exchange does not provide tax or legal advice.
To discuss whether §1031 might be beneficial to you, please call one of Old Republic Exchange’s dedicated
professionals.

Visit us at oldrepublicexchange.com for more information.

31 32