If you've ever wondered about a 1031 Exchange please see our article below which was featured in the recent edition of the West Maui Neighbors magazine!


It’s tax time – have you considered a 1031 exchange to defer capital gains taxes? 


Asset performance

Are you looking at your portfolio and wondering if your investment property is performing as well as it should or if there is a better use for your cash? Would it make sense to relocate, consolidate or upgrade investment assets? You could also sell one larger asset and replace it with assets in different locations or different types of assets that better suit future family needs.  Deferring your capital gains through a 1031 exchange lets you keep your money if you re-invest in one or more properties of equal or greater value.


Land ownership questions

If you are a landowner, have your goals for that property changed?  Did you inherit the land, purchase it as an investment, for its value and appreciation potential, or to build a future home? Is that property more of a liability than an asset? If you could exchange your vacant land for income producing property and defer any capital gains tax, what could you do with that new-found income? How would that impact you and your family’s life?


Ensuring your family legacy

Did you know that you could help your family with a home by executing a 1031 exchange? Family members can inherit investment property in the future with a stepped-up basis (market value at the time of your demise), which can eliminate deferred capital gains tax on that exchanged property.


Requirements for a successful exchange

You need to know the required steps to achieve a 1031 exchange and work with the team necessary to achieve your goals – your realtor, tax advisor, attorney, qualified intermediary, lender and escrow company. Here are some of the steps to follow for a successful exchange:

  • Make sure the numbers allow you to reach your goals
  • Prepare your property for sale and price it to sell in the current market
  • Simultaneously search for a replacement property
  • Carefully handle due diligence of replacement property
  • Close on replacement property and defer capital gains
  • Watch the timing carefully to stay within IRS guidelines.


You need to adhere to some guidelines for 1031 Exchange:

  • You must designate up to 3 replacement properties within 45 calendar days of sale of relinquished investment property or the 200% rule may apply
  • The purchase of replacement property must close escrow within 180 days from closing date of relinquished property
  • You must select a qualified intermediary before closing escrow on the relinquished property and may not take possession of any cash proceeds from the sale of that property – funds must be handled by that intermediary.


For more information on 1031 exchanges go to or register now for our next FREE 1031 Exchange Seminar in Kahului on March 28.



** This is not tax advice – please consult with your tax professional.


With warm aloha,


Barbara and Lee Potts