The 1031 Rescue is a tax compliant strategy that allows the 1031 exchangor to receive capital gains deferral in the event that their 1031 fails. This is accomplished through the use of NAFEP's Self Directed Installment Sale (SDISSM) in conjunction with a 1031 exchange.
If the 1031 exchange fails, then the QI will turn over a installment note for your property
You will then receive a series of payments and defer capital gains taxes over the term of the note
With a typical 1031 exchange, if the exchangor fails to successfully complete the exchange, then they must pay all capital gains taxes in that tax year. Capital gains taxes can be 20% to 28% for both federal and state, depending upon the state.
The reasons for a 1031 failure may be due to:
Not finding the replacement property
Not closing on the replacement property with the 180 day window
Seller backs out
Terms of sale cannot be met
Financing falls through
And many others...
Note: The failure rate of 1031 exchanges is around 15%, or $23 billion annually. Source: NAFEP; FEA, Aug 2007 -Letter to FTC
Source: Los Angeles Business Journal, Nov 26, 2001 • by Christopher Keough
The Solution - A 1031 RescueTM
The 1031 Rescue is a tax compliant strategy that allows the 1031 exchangor to receive capital gains deferral in the event that their 1031 fails.
This is accomplished through the use of NAFEP's Self Directed Installment Sale (SDISSM) in conjunction with a 1031 exchange.
If the 1031 exchange fails, then the QI will turn over a installment note for your property
You will then receive a series of payments and defer capital gains taxes over the term of the note
Benefits of the 1031 RescueSM
Guaranteed deferral of capital gains taxes
No worries about the many pitfalls that cause the 1031 to fail
Deferral of capital gains taxes builds your wealth
The installment sale provides for a stream of income without the risks associated with a traditional installment sale.
Ability to take cash after failure and pay the taxes
Ability to use the note as collateral for purchase of a property after the 1031 fails
