Steps To A Successful 1031 Tax-Deferred Exchange

Consult with your tax and financial advisors to determine if a tax-deferred exchange is approriate for your investment goal.

Listing the relinquised property for sale with a licensed real estate broker.  The Exchanger will lsit the relinquished property with a real estate broker.  The broker will disclose the intent to complete an exchange in the listing ageement

The exchanger (seller) enters into contract with the buyer for the sale/exchange of the relinquised property that discloses the seller's intent to complete an exchange, and obtain the buyers cooperation.

Excrow is opened for the relinquised property and coordinated with the facilitator.  All earnest money will be held in escrow.  The facilitator prepares the exchange agreement athe the necessary amendments and assignments and coordinates with the closing attorney.  Close of escrow for the relinquished property and the receipt to the net proceeds by the facilitator completes the first phase of a tax-deferred exchange.  The exchange documents must be in place and signed by all parties prior to close of escrow. 

The replacement property is then identified.  The exchanger must identify all replacement property within 45 days from the close of escrow of the relinquished property.  The identification must be in writing, signed by the exchanger, and sent to the proper parties by the end of the 45th day.

After closing takes place on the relinquished property, the exchanger has up to 180 days to acquire the replacement property.  Your real estate agent will assist you to enter into contract to purchase the replacement property from the seller.  In the contract to purchase the exchanger discloses the exchanger's intent to complete the exchange and obtains the seller's cooperation.

The facilitator prepares phase two of this exchange with the proper documents and coordinates with the replacement property closing agent.  At the instruction of the facilitator the funds held in trust by the facilitator are placed in escrow and the closing agent deeds the replacement property from the seller directly to the exchanger.  The delayed exchange is closed

FOR A SUCCESSFUL EXCHANGE YOU MUST DO THE FOLLOWING:

Consult with your financial advisor or accountant to make sure an exchange is your best investment option.

You should exchange equal or up in value and apply all of the net equity towards payment of the acquisition property, in order to take full advantage of the 1031 exchange.

You must exchange for "like-kind" property (Call for details)

You must follow the 45/180 day rules.

YOUR INTENT MUST BE TO EXCHANGE!


Note:  Internal Revenue Code Section 1031 allows the taxpayer to defer capital gains tax and to use the increased equity to purchase a larger property or properties.



Disclaimer:  This information is provided strictly as a genral information resource.  This information is deemed reliable but may not be warranted.  Please check with your tax accountant or financial advisor for updates.