Commercial real estate professionals and investors spent much of 2021 worrying about the continued availability of 1031 tax deferred exchanges for investment real estate. There were a number of proposals floating around Congress which would have done everything from nullifying the benefits of a 1031 exchange transaction to ending the availability of the exchanges all together. We are a month into 2022 and 1031 exchanges are still alive and kicking. 

With the dramatic increase in real estate values due in part to low interest rates and low inventory, investors can get even more bang for their buck utilizing a 1031 exchange.  Most real estate investors know the most common type of 1031 exchange where the investor sells an investment property and then identifies and acquires a like-kind replacement property within prescribed time periods, but there are a number of other types of 1031 exchanges available for use. 

• The reverse exchange is available in the situation where the investor buys the “replacement” property before selling the “relinquished” property.  In a seller’s market that relieves some of the pressure to identify a replacement property within 45 days and close on the purchase within 180 days. 
• The improvement exchange is available to acquire vacant land or a derelict property and spend 1031 exchange proceeds to construct a new building or renovate an existing building. 

While we are not out of the woods yet on the action that Congress may take to nullify, limit or outright end 1031 exchanges, these transactions remain a viable tool to the savvy real estate investor.