1031 exchange rules are complicated. Having the right team to help you properly navigate the transaction simplifies the process for you. It’s worth it many times over to have the right realtor, tax advisor, attorney and 1031 intermediary in place. Don’t wait until you’re in the middle of the 1031 exchange before putting your team to work for you. You’ll save yourself a lot of time and stress to delegate this tax deferment transaction.
Find 1031 Replacement Property
You have just 45 days from the transfer sale to identify the replacement property. If you don’t identify the replacement property within 45 days then you can’t perform the 1031 exchange.
Multiple Properties
You can perform a 1031 exchange with the purchase of more then one property. In addition, you can sell one property in exchange for more then one. There is no limit on the number of units you can exchange.
1031 Exchange Closing Period
You have 180 days to close on a 1031 exchange. If you don’t identify the exchange property within 45 days of the transfer and close within 180 days then you won’t qualify for the 1031 exchange.
Like Kind
You must perform the 1031 exchange by exchanging like kind property. The like kind refers to use, not property type. The 1031 exchange must be performed by exchanging like kind property. Like-kind refers to use and intent, not property type. Most often, all real property within the United States qualifies. However, your intent must be to use the property for investment or productive use in a trade or business.
1031 Holding
In order to perform another exchange you must hold the property for at least one year and one day. After that time period you are free to perform another exchange.
1031 Extension
You will not be able to receive a 1031 exchange extension. The three time constraints are immovable. You have no more then 45 days to identify the new property. Closing must occur within 180 days. You have to retain the property for at least one year and one day.
Value Increase
The new investment purchase price must be equal to or greater than the property being sold.
1031 Exchange Debt
The debt must be exchanged at the same level or increase for a 1031 exchange.
1031 Exchange Primary Residence
You can’t initially use a 1031 exchange property for your personal residence until after you have owned the property for two years. After two years of ownership you can reside in the property 100%. Before the two year mark the owner can reside in the property for no more then 10%. This excludes time to implement improvements.
1031 Exchange Closing
You must set up the 1031 exchange prior to closing. You cannot set it up after closing.
1031 Exchange Tips
1031 Exchange Realtor
Select a realtor that knows what clause to include in the Purchase and Sale Agreement to properly accommodate the 1031 exchange.
Select a Qualified Intermediary
A 1031 intermediary transacts the funds and documents necessary to complete a successful 1031 exchange. Your current employee, attorney, accountant, investment broker and real estate agent cannot act as the intermediary. The intermediary will hold the exchange funds in a separate account for the benefit of the exchanger until the funds are used to purchase the replacement property. The intermediary is responsible for preparing the exchange documents. These include the Exchange Agreement, Assignments of Purchase and Sale Agreements, Notices of Assignment and Replacement Property Identification Notice among other documents.
1031 Exchange Companies
We have several highly recommended Qualified Intermediary companies such as IPX1031. Contact us if you would like to request a local representative to contact you.
1031 Exchange Tax and Legal Advice
Be sure to consult with your attorney and tax accountant in regards to the use of the new property. This is especially important if you are planning personal use whether as a vacation property or full or part time future residence.
The rules of the 1031 exchange are complicated. Therefore, before you get started put together a qualified team. It will alleviate your burden of managing all of the 1031 exchange logistics.
Have you decided to move on a 1031 exchange? Put us to work for you! Schedule your appointment today.
