INVESTOR'S GUIDE
WHAT IS A 1031 EXCHANGE?
A straight forward walk through of how investors sell appreciated real estate, defer the capital gains tax, and roll the full proceeds into their next property.
INVESTOR'S GUIDEBOOK
A big commitment,
explained in plain language
A 1031 exchange doesn't have to be difficult. The key is understanding the mechanics before you're on the clock. This guide walks through how a like-kind exchange actually works, using non-technical language, worked examples, and clear timelines throughout.
- What a Section 1031 like-kind exchange is and how it works
- The potential benefits of deferring capital gains tax
- The rules, deadlines, and risks to know before you start
- How to identify and close on a replacement property
- A step-by-step roadmap from sale to filing
WHAT DEFERRAL IS ACTUALLY WORTH
One sale. Two very different outcomes.
A simplified, hypothetical scenario from inside the guide: an investor sells a $1.7M property and reinvests at a 5.5% target return, with and without exchanging.
SELL OUTRIGHT
$ 71,707
annual income, after paying ~$396K in combined taxes
1031 EXCHANGE
$ 93,500
annual income, full $1.7M proceeds reinvested
≈30% more annual income from the same capital event, no better deal required
Hypothetical example for illustrative purposes only; it does not represent an actual or specific investment. Actual figures depend on individual tax circumstances and are never guaranteed. Consult your tax advisor. Full math is in Section Two of the guide.
INSIDE THE GUIDE
Seven sections, start to close
Written to be read start to finish or used as a reference while you're actually mid-exchange.
What is a 1031 Exchange?
The mechanics, the vocabulary (relinquished property, qualified intermediary, like-kind), and why the strategy has survived a century of tax reform.
The Potential Benefits
Every layer of tax a sale can trigger (federal, state, recapture, the NIIT surtax) and a worked example of what deferring all of it is worth.
The Fine Print: Rules, Deadlines, and Risk
The 45- and 180-day clocks, the year-end filing trap, constructive receipt, and the risks that apply regardless of how the exchange is structured.
Choosing a Replacement Property
How wide "like-kind" really is, why location isn't a constraint, and the identification rules for naming backup candidates.
When You'd Rather Not Manage the Replacement
A passive ownership path that still satisfies the like-kind requirement, for investors who want the deferral without taking on another property to run.
The KNPRE Roadmap
The same six steps apply either way: prepare, engage a QI, sell, identify, close or invest, and report.
About Keystone
Who we are, how our team works, and what to expect if you reach out.
FREE DOWNLOAD
Get the guide before your next decision
Whether a sale is already on the table or you're planning years out, this is the reference to read before the 45-day clock starts.
+1 (212) 575-2152 · invest@knpre.com · New York | Los Angeles
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For Educational Use Only
Not an offer to buy, nor a solicitation to sell securities. Information herein is provided for information purposes only, and should not be relied upon to make an investment decision. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing.
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Important Disclosure
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by the issuer, or any affiliate, or partner thereof ("Issuer"). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance is no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Securities through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.
1031 Risk Disclosure:
• There is no guarantee that any strategy will be successful or achieve investment objectives;
• Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
• Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
• Potential for foreclosure – All financed real estate investments have potential for foreclosure;
• Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
• Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
• Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.
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