1031 Exchange - Selling Colorado Investment Property
If you’re planning on selling an investment property, you may face a large
capital gain that could be subject to federal and state taxes. A
tax-deferred exchange under Section 1031 of the Internal Revenue Code allows you to
sell investment properties and acquire “like–kind”
properties while deferring federal, and possibly state, capital gains taxes.
An independent party must act as a qualified intermediary to hold your
funds between the sale of your relinquished property and the
purchase of your replacement property.
We know you want your funds to be secure. With your exchange funds held at
Vectra Bank*, you have the security of a regulated financial
institution and FDIC insurance up to $250,000. Funds are held in a
Qualified Trust for your benefit, where they can only be disbursed with
your written approval.1
A 1031 Exchange allows you to reinvest sale proceeds
that would otherwise be subject to capital gains taxes.
Leverage and Diversification
Leverage or spread your equity to acquire more
Consolidate the equity among varying properties.
Move equity from property such as raw land into
higher income-producing assets, such as commercial
Replace property with excessive maintenance
with a managed property.
Change property types to take maximum
advantage of available depreciation.
Include 1031 strategies in your estate plan and
turn tax deferrals into tax savings:
|Sample Tax on Gain
|Equity to Reinvest
1. Qualified Use
Relinquished and replacement properties must both
be held for investment or productive use in a trade or
2. Holding Period
There is no specific time required to establish intended
use for an investment. What’s important is that you
treat the property as an investment and not hold it for
resale or personal use.
A replacement property must be “like-kind” to the
relinquished property (e.g., real estate for real estate, or
aircraft for aircraft).
4. Equal Value
To defer all the tax, replacement property must be of
equal or greater value to the relinquished property. All
proceeds from the sale of relinquished property must also
be used in the purchase of the replacement property.
5. Purchase Period
The replacement property must be identified within
45 days, and acquired within 180 days of the sale of the
6. Id entification
You may identify the replacement property through
three options: (1) three properties, no matter what their
value; (2) any number of properties, with a combined
market value that doesn’t exceed 200 percent of all
relinquished property; (3) any number of properties, as
long as you acquire 95 percent of the total value of the
7. Qualified Intermediary
A qualified intermediary must hold sale proceeds
between the sale of the relinquished property and the
purchase of the replacement property.
Your 1031 Exchange can be done in three easy steps:
1. Sell relinquished property
We will help you complete the necessary documentation for your
exchange. At closing, all proceeds are directed to a Vectra Bank
Qualified Trust Account for your benefit.
2. Id entify replacement property
Identify the replacement property to be purchased within
45 days following the sale of the relinquished property.
3. Purchase replacement property
Acquire the replacement property within 180 days of the sale
of the relinquished property or the due date of the tax return,
including extensions, for the year in which the sale occurred,
unless the exchange period is otherwise extended by a federal
disaster declaration. Proceeds will be paid directly out of your
Vectra Bank Qualified Trust Account.1
For more information on how you or your
company can benefit from this product,
contact your local Vectra Bank relationship
manager or call us today at 720-947-7642.
*All exchange and qualified intermediary services are offered through Exchange Services, LLC, a Utah limited
liability company, an affiliate of Vectra Bank.
1All Qualified Intermediary Trust Accounts are held on deposit with Vectra Bank.
To download this information as a PDF click here.