1031 Exchanges & Mineral Rights

1031 exchanges are an often underutilized tool for deferring capital gains taxes, diversifying, and maximizing value. Think beyond traditional real estate and learn how 1031 exchanges can be used to acquire alternative assets like cash-flowing mineral rights.

Seamless movement from one asset class to another.

Deferral of capital gains on transferred property.

Easily diversify into the energy industry.

  • Seamless movement from one asset class to another
  • Deferral of capital gains on transferred property
  • Easily diversify into the energy industry
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What Eckard Offers with 1031 Exchanges & Mineral Rights:

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Tax Deferral

A 1031 exchange allows for the deferral of capital gains taxes on the sale of a currently held investment property. The proceeds can then be reinvested in like-kind properties, such as mineral rights.

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Diversification

With a 1031 exchange, one can diversify into highly sought after energy assets that may provide a hedge against inflation and other economic variables. Gain exposure to the energy industry while deferring taxes.

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Energy Properties

Mineral rights provide ongoing royalty income from resource extraction. These are long-term assets that don’t require much management compared to traditional rental properties.

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HOW DOES IT WORK?

Section 1031 tax exchanges present the means to acquire valuable tangible assets while deferring capital gains taxes. When property of any kind is sold, taxes must be paid on the gains. However, section 1031 of the Internal Revenue Code presents a means of deferring these gains while seamlessly transitioning into another asset class. Read on to learn more.

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It’s all about the time frame.

A 1031 exchange must occur within certain timing parameters in order to be successful and legally sound. After selling the original property, the seller has 45 days to select a replacement property that is like-kind. After a replacement property is identified, the new property must be closed on within 180 days to complete the exchange.

Good news! Mineral rights are considered a like-kind asset.

The replacement property must be considered like-kind, meaning that it has similar characteristics. The property must also be held for investment or business purposes. Many investors aren’t aware or don’t consider the fact that mineral rights are eligible for 1031 exchanges as a like-kind asset. This means that traditional real estate assets can be “exchanged” for mineral rights, allowing for long-term monthly cash flow without the hassles of dealing with tenants, maintenance, and property taxes.

The 1031 Exchange Timeline

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The 1031 Exchange Timeline

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