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Monthly Archives: November 2010

How long does a 1031 Exchange take?

Friday, November 26, 2010

Generally, 1031 Exchanges can happen rather quickly, depending on your needs. If you are closing on your 1031 Exchange Relinquished Property today, you can generally close on a 1031 Exchange Replacement property tomorrow. There are some deadlines to be aware of both of which begin on the date you close on your Relinquished property. 45 [...]

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What is an Earnest Money Clause?

Wednesday, November 24, 2010

We recommend that you insert following clause into your Purchase & Sale agreement. This way all parties know that the transaction will be a 1031 exchange, and there will be no lack of disclosure which may obstruct the transaction. (This is merely a suggestion, and is not required by the “1031″ regulations ) “A material [...]

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My realtor told me that I am not a loud to use any of my proceeds before I purchase a Replacement Property. Is this true?

Wednesday, November 24, 2010

When you close sale on your Relinquished property the proceeds need to be kept in a safe harbor with a Qualified Intermediary (Realty Exchangers). During your exchange period your proceeds can ONLY be used to purchase qualified 1031 Exchange Replacement Properties. Any withdrawal of your funds could negate your 1031 Exchange when the IRS reviews [...]

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Do I need to find a local 1031 Exchange Qualified Intermediary?

Tuesday, November 23, 2010

Some people who are getting ready to close on their 1031 Exchange property think they need to work with a local Qualified Intermediary in their city or state. This is not true. The IRS Section 1031 Exchange is a federal action. This means you should be able to work with the Qualified Intermediary of your [...]

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How many replacement properties can I have?

Tuesday, November 23, 2010

There are 3 rules: The one most people use is the 3-Property Rule because they can identify 3 1031 Exchange Replacement Properties without regard to fair market values of the properties. You figure fair market value of Replacement Property as of the end of the identification period. The next rule is the 200 percent rule [...]

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What if I can’t find a replacement property during the 1031 exchange 45 day identification period?

Monday, November 22, 2010

Yes. This is a risk. The IRS gives you 45 days after you close sale on your Relinquished Property to officially Identify the properties that you intend to purchase or replace your relinquished property with. Some people already have a replacement property in mind before they close BUT this is not a necessity. You DO [...]

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I bought a house in June 2010 and told the bank that it is for a primary residence. However, I have not lived in the house yet. Does it qualify for a 1031 exchange?

Monday, November 22, 2010

Hi there. Remember that a 1031 Exchange property must be an investment property, such as land or an income producing property such as a rental home.  In order for you home to match the 1031 Criteria, you must show you collected rents from it for 2 tax periods. Some QI’s tell customer that it is [...]

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I own my mom’s house, never lived in it and want to 1031 Exchange it into something else, now that she is gone. Can I do this?

Monday, November 22, 2010

Answer: This is a very tricky scenario. Be sure to discuss this at length with your CPA and/or Tax Attorney.  Be sure to put your situation to this test. Did you collect rents from your mother while she lived in the house? If not, the IRS could view your mother’s place as a second home [...]

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What is the difference between Capital Gains and Equity?

Monday, November 22, 2010

Answer:  Don’t confuse them, they are not the same. Equity is the money left over once you sell a  property and pay off all the liabilities including mortgages. Capital gain on a property would be the difference between your basis and your adjusted sales price. If you bought property for $20k (your basis) and sold [...]

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Some 1031 companies say “defer”, some say “don’t pay” capital gains tax with a 1031 Exchange. Which is correct?

Sunday, November 21, 2010

Answer:  When you sell your property and purchase another property with a like-kind property you are conducting an IRS 1031 Exchange. “Defer” or “Don’t Pay” is simply marketing language intended to get your to consider a 1031 Exchange if you have property to sell. With a 1031 Exchange the reality is that “some day” you [...]

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