In 2025, there will be a significant increase in the number of distressed properties due to billions of dollars in commercial mortgages maturing. Julie Baird, president of First American Exchange Company, believes that utilizing the 1031 exchange process can offer unique opportunities for dealing with these assets.
Connect CRE recently spoke with Julie Baird about why the 1031 exchange process is a valuable tool for handling distressed properties. According to Baird, sellers who dispose of their property are likely to face taxable gains and depreciation recapture. For example, if a property was purchased for $70 million but ends up being worth only $80 million (with all debt), even if there is no cash from the sale, the seller would still have to pay taxes on a gain of $10 million and depreciation capture. However, by using a 1031 exchange , sellers can defer this tax burden on what would otherwise be considered as total loss.
On the other hand
