Using a 1031 Exchange to Sell Your Telecom Asset, Defer Paying Taxes, and Buy a Traditional Real Estate Asset

A 1031 Exchange, named after Section 1031 of the U.S. Internal Revenue Code, is a powerful tax-deferral strategy that enables real estate investors to sell one investment property and reinvest the proceeds into another like-kind property without incurring capital gains taxes immediately.

At 17 Mile, we have successfully utilized 1031 Exchanges to defer paying capital gains taxes and have worked with clients seeking to employ this strategy to mitigate the risk of telecom lease termination and expand their real estate portfolios, while preserving capital for investment.

What Is a 1031 Exchange and Why Use It?

If you’re a real estate investor looking to scale your portfolio, increase cash flow, and defer capital gains taxes, a 1031 Exchange can be your most valuable financial tool. Here’s how it works to your advantage:

Key Benefits of a 1031 Exchange

1. Defer Capital Gains Taxes
By deferring taxes on the sale of your property, you retain more equity to reinvest, boosting your purchasing power and enhancing your return on investment.

2. Expand and Scale Your Portfolio
Use a 1031 Exchange to tap into the equity value in your property and trade up from a single-family home to a multi-unit apartment complex or commercial real estate, without triggering a capital gains tax event that reduces your capital available to invest.

3. Consolidate or Diversify Your Investments
Whether you’re consolidating several smaller assets into one larger property or diversifying across markets and property types, a 1031 Exchange gives you flexibility without a tax penalty.

4. Improve Cash Flow and Operational Efficiency
Exchange a high-maintenance property for one that offers better cash flow or simpler management.

How Does a 1031 Exchange Work?

➤ Tax Deferral
The 1031 Exchange doesn’t eliminate taxes—it defers them as your original basis rolls over into the new property. This lets you reinvest your full proceeds into a new property and defer tax liability until you sell the new asset (unless it’s part of another exchange).

➤ Like-Kind Property Requirement
Both the relinquished and replacement properties must be held for business or investment use. Telecom assets sold under easements qualify if documented correctly. Primary residences and properties held for resale (such as flips) don’t qualify.

➤ 1031 Exchange Timelines
To stay IRS-compliant, you must:

•  Identify potential replacement properties within 45 days
• Close on the new property within 180 days
• The purchase price of the new property must be at or above the net selling price of the old property, or you may be liable for some capital gains taxes

➤ Qualified Intermediary (QI) Requirement
A Qualified Intermediary must hold the funds from the sale and manage the exchange process to meet IRS rules. You cannot receive  the sale proceeds yourself; it will disqualify the exchange. QIs are easy to work with, but involving another party in closing takes some additional coordination and communication.

Ask 17 Mile if a 1031 Exchange might work for you

A 1031 Exchange is more than just a tax strategy—it’s a pathway to long-term wealth building, portfolio growth, and increased investment flexibility. At 17 Mile, we assist our clients through the exchange process and can work closely with QIs, CPAs, and tax advisors to ensure compliance and success.

Ready to explore your 1031 Exchange options for your telecom asset?
Contact 17 Mile today to schedule a consultation and discover how this strategy can fuel your financial growth.