1031 HELP
1 Ask us a 1031 Question
2 1031 Exchange FAQ
3 What is a 1031 Exchange?
4 What do I need to know?
5 What does a 1031 cost?
6 How do I get started?
7 Step-by-step instructions
8 Set-up a 1031 Exchange
9 FREE 1031 Procedure Manual
10 1031 Exchange Info Center
11 Find Local 1031 Professionals
12 Find Replacement Properties
1031 Exchange FAQ - REPLACEMENT PROPERTIES
Quick 1031 FAQ Search
1031 Question Categories
How do I find 1031 Exchange Replacement Properties?
Answer: Often Exchangers already have their 1031 Exchange Replacement property lined up before they close on their Relinquished Property. For those who don't, there are many resources on-line for finding a replacement property. Our 1031 Exchange web site at realtyexchangers.com has a couple of really good resources available to you.
First. Check out our list of 1031 professionals from every major US city in every state! Shopping for Realtors? This is where to look. There are probably many 1031 pros available in your area, RIGHT NOW. Visit our 1031 Exchange Professionals Directory today!
Second. When we first launched our web site over 15 years ago, we were the first to offer a comprehensive search engine for finding 1031 Exchange replacement properties. It was called the Exchanger's Clearinghouse and it was extremely popular among 1031 Exchangers. When we relaunched our web site last Summer, the Exchanger's Clearing house was relaunched as well. Though still new, it is fast becoming a resource of for 1031 Exchange properties. Listing your properties is always FREE and we have "Haves" and "Wants" lists. Visit the new Exchanger's Clearinghouse today!
First. Check out our list of 1031 professionals from every major US city in every state! Shopping for Realtors? This is where to look. There are probably many 1031 pros available in your area, RIGHT NOW. Visit our 1031 Exchange Professionals Directory today!
Second. When we first launched our web site over 15 years ago, we were the first to offer a comprehensive search engine for finding 1031 Exchange replacement properties. It was called the Exchanger's Clearinghouse and it was extremely popular among 1031 Exchangers. When we relaunched our web site last Summer, the Exchanger's Clearing house was relaunched as well. Though still new, it is fast becoming a resource of for 1031 Exchange properties. Listing your properties is always FREE and we have "Haves" and "Wants" lists. Visit the new Exchanger's Clearinghouse today!
Related Info: properties, replacement, exchanger's, site, clearinghouse, professionals
How many replacement properties can I have?
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 which allows you to identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties. You figure fair market value of Relinquished Properties as of the date you transfer them.
The final rule is the 95 percent rule which allows you to identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Beware of the 200 percent rule and the 95 percent rule. If you are choosing to follow these rules, we suggest you get help from your CPA or Tax Attorney. If they are not conducted properly as of the end of the identification period and you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified. Which means the IRS could decide that no 1031 Exchange occurred and you would end up paying the capital gains tax.
This is why most people follow the 3 property rule, it is easiest to understand with lessor risk.
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 which allows you to identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties. You figure fair market value of Relinquished Properties as of the date you transfer them.
The final rule is the 95 percent rule which allows you to identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Beware of the 200 percent rule and the 95 percent rule. If you are choosing to follow these rules, we suggest you get help from your CPA or Tax Attorney. If they are not conducted properly as of the end of the identification period and you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified. Which means the IRS could decide that no 1031 Exchange occurred and you would end up paying the capital gains tax.
This is why most people follow the 3 property rule, it is easiest to understand with lessor risk.
Related Info: properties, replacement, rule, market, fair, value
I need to change my identified replacement properties. How do I do that?
The Identification of 1031 Exchange replacement properties can be revoked as long as it is done within the 45-day identification period. This revocation must be done in writing and should include a rescission of a purchase and sale agreement, if one was written. The next step would be to write a new Identification letter that includes the properties you intend to close sale on before the 45 day deadline is reached.
Related Info: properties, replacement, identified, change, identification, sale, letter, agreement, includes
In a 1031 Exchange, do I have to close sale on ALL of my identified replacement properties?
Believe it or not, the answer to this question is entirely up to you. If your goal is to defer your capital gains tax, then yes you are expected to close on all of your identified 1031 Exchange replacement properties. However, sometimes these deals fall through. There is no law that says you "MUST" close on all of your properties, but remember that any remaining proceeds left over from the sale of your relinquished property are subject to the capital gains tax.
Related Info: properties, replacement, identified, sale, gains, capital, says, relinquished, remaining
How does the 1031 Exchange 95 percent % rule for identifying replacement properties work?
When you conduct a 1031 Exchange the IRS says you must identify your replacement properties no more than 45 days after you sell your property. There are 3 options of identifying your replacements, the most popular is the 3 property rule. The others are the 200% rule and the 95% rule.
With the 95 percent rule, you may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Related Info: properties, work, replacement, identifying, rule, percent, fair, identified
How does the 1031 Exchange 95% rule for identifying replacement properties work?
When you conduct a 1031 Exchange the IRS says you must identify your replacement properties no more than 45 days after you sell your property. There are 3 options of identifying your replacements, the most popular is the 3 property rule. The others are the 200% rule and the 95% rule.
With the 95% rule, you may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Related Info: work, properties, replacement, identifying, rule, value, fair, identify
In my 1031 Exchange, do I have to purchase 3 replacement properties?
You have three purchasing options when it comes to your 1031 Exchange Replacement Properties. By far the most popular option is the 3 property rule, which means that you may purchase up to 3 replacement properties without regard to the fair market value of these properties. Naturally, if you purchase 3 properties that are valued higher that your 1031 Exchange proceeds, you will have to make up the difference out of your own pocket. And no, you do not have to purchase exactly 3 properties, you may purchase 1 or 2 properties without penalty. Purchasing more than 3 properties, would lead you to decide to use one of the other Replacement Property options, such as the 200% rule or the 95% rule.
Related Info: properties, replacement, purchase, rule, purchasing, options
In a 1031 Exchange, how many Replacement Properties can I have?
In a 1031 Exchange, you have 3 choices for determining how many Replacement Properties to Identify. These are the 3 Identification rules set down by the IRS for 1031 Exchange. You may choose which of these rules to follow at any time during the 45 day Identification period. One you have chosen which rule to follow, you may not change your mind after the 45 day deadline.
The 3-Property Rule
The maximum number of replacement properties you may identify is three properties without regard to fair market values of the properties.
The 200 Percent Rule
You may identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties. You figure fair market value of Replacement Property as of the end of the identification period. You figure fair market value of Relinquished Properties as of the date you transfer them. If, as of the end of the identification period, you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified.
The 95 Percent Rule
You may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Special Exception
Any Replacement Property received by you before the end of the identification period is treated as being properly identified under the Identification Rules.
The 3-Property Rule
The maximum number of replacement properties you may identify is three properties without regard to fair market values of the properties.
The 200 Percent Rule
You may identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties. You figure fair market value of Replacement Property as of the end of the identification period. You figure fair market value of Relinquished Properties as of the date you transfer them. If, as of the end of the identification period, you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified.
The 95 Percent Rule
You may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Special Exception
Any Replacement Property received by you before the end of the identification period is treated as being properly identified under the Identification Rules.
Related Info: properties, replacement, fair, market, value, identification
After we close on my relinquished property, how soon can I access my proceeds.
Answer: As you qualified intermediary, we are holding your proceeds for one specific purpose, so that you can purchase a replacement property and complete your 1031 Exchange. We can give you proceeds back anytime you wish and for whatever purpose, but if the goal is 1031 Exchange, there are some IRS rules to follow.
1. You can take back proceeds, called "boot receivable" at the time your Relinquished Property closes. These funds are subject to Capital Gains and are deducted from your proceeds BEFORE they are transferred to your Qualified Intermediary.
2. Soon as you Identify your properties (within 45 days of the sale of your relinquished property), you have 180 days to close sale on them. The IRS states that you cannot access any of your proceeds until ALL of your identified properties have closed sale.
Any access to your proceeds during the 180 day period prior to closing on your identified replacement properties could negate your entire 1031 exchange, which means your entire proceeds could be subject to the Capital Gains Tax.
1. You can take back proceeds, called "boot receivable" at the time your Relinquished Property closes. These funds are subject to Capital Gains and are deducted from your proceeds BEFORE they are transferred to your Qualified Intermediary.
2. Soon as you Identify your properties (within 45 days of the sale of your relinquished property), you have 180 days to close sale on them. The IRS states that you cannot access any of your proceeds until ALL of your identified properties have closed sale.
Any access to your proceeds during the 180 day period prior to closing on your identified replacement properties could negate your entire 1031 exchange, which means your entire proceeds could be subject to the Capital Gains Tax.
Related Info: proceeds, access, relinquished, sale, properties, identified
Frequently Asked 1031 Exchange Question
Question: After we close on my relinquished property, how soon can I access my proceeds.
Answer: As you qualified intermediary, we are holding your proceeds for one specific purpose, so that you can purchase a replacement property and complete your 1031 Exchange. We can give you proceeds back anytime you wish and for whatever purpose, but if the goal is 1031 Exchange, there are some IRS rules to follow.
1. You can take back proceeds, called "boot receivable" at the time your Relinquished Property closes. These funds are subject to Capital Gains and are deducted from your proceeds BEFORE they are transferred to your Qualified Intermediary.
2. Soon as you Identify your properties (within 45 days of the sale of your relinquished property), you have 180 days to close sale on them. The IRS states that you cannot access any of your proceeds until ALL of your identified properties have closed sale.
Any access to your proceeds during the 180 day period prior to closing on your identified replacement properties could negat
Answer: As you qualified intermediary, we are holding your proceeds for one specific purpose, so that you can purchase a replacement property and complete your 1031 Exchange. We can give you proceeds back anytime you wish and for whatever purpose, but if the goal is 1031 Exchange, there are some IRS rules to follow.
1. You can take back proceeds, called "boot receivable" at the time your Relinquished Property closes. These funds are subject to Capital Gains and are deducted from your proceeds BEFORE they are transferred to your Qualified Intermediary.
2. Soon as you Identify your properties (within 45 days of the sale of your relinquished property), you have 180 days to close sale on them. The IRS states that you cannot access any of your proceeds until ALL of your identified properties have closed sale.
Any access to your proceeds during the 180 day period prior to closing on your identified replacement properties could negat
Related Info: asked, frequently, proceeds, relinquished, sale, properties, access, replacement
What if I can't find a replacement property during the 1031 exchange 45 day identification period?
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 NOT have to have a replacement property in mind before you close on your relinquished property. Many clients use the entire 45 days to identify their replacements and as your IRS 1031 Exchange Qualified Intermediary, Realty Exchangers will provide you with the necessary Identification Form that you use to show the IRS that you property Identified your Replacement Properties.
We also have a number of resources on our web site that can help you find your Replacement Property, be sure to check out the Exchanger's Clearinghouse and our 1031 Exchange Professionals Directory that will help you find a local 1031 pro.
We also have a number of resources on our web site that can help you find your Replacement Property, be sure to check out the Exchanger's Clearinghouse and our 1031 Exchange Professionals Directory that will help you find a local 1031 pro.
Related Info: period, identification, replacement, relinquished, properties, identify, resources, site
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?
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 your file.
You have two opportunities to access your proceeds and not jeopardize your exchange.
The first is when you close sale on your Relinquished property. At that time you make take a portion of the proceeds back for your own use. This called Boot Receivable and is subject to Capital Gains Tax. The remaining funds from your sale should be transferred as your proceeds into your Qualified Intermediary's (Realty Exchangers) client trust account.
The second is after you have closed sale on all of your Identified Replacement Properties before the 180 day deadline. These left-over proceeds are also subject to capital gains tax.
You have two opportunities to access your proceeds and not jeopardize your exchange.
The first is when you close sale on your Relinquished property. At that time you make take a portion of the proceeds back for your own use. This called Boot Receivable and is subject to Capital Gains Tax. The remaining funds from your sale should be transferred as your proceeds into your Qualified Intermediary's (Realty Exchangers) client trust account.
The second is after you have closed sale on all of your Identified Replacement Properties before the 180 day deadline. These left-over proceeds are also subject to capital gains tax.
Related Info: replacement, purchase, proceeds, realtor, sale, funds, gains, capital
How long does a 1031 Exchange take?
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 day Identification Deadline. This date ends 45 calendar days after you close on your Relinquished property. Basically, this is a letter to the IRS that officially announces the Replacement properties on which you intend to close sale. Any of these properties you Identify can be revoked before the 45 day deadline has been reached. You would just re-write your announcement letter. Realty Exchangers, Inc provides you with the Identification form that you will need to give to the IRS when you close on your Relinquished property. If you close on any Replacement Property before your 45 day deadline is reached, you do NOT have to Identify them with the form.
180 day Closing Deadline. This deadline also begins when you close on your Relinquished property. You have half a year to close on your Identified Replacement properties, which should be ample time to complete this task. If you do not close on all of your Identified Replacement Properties before this date is reached, you could end up paying Capital Gains Tax on all un-spend proceeds.
45 day Identification Deadline. This date ends 45 calendar days after you close on your Relinquished property. Basically, this is a letter to the IRS that officially announces the Replacement properties on which you intend to close sale. Any of these properties you Identify can be revoked before the 45 day deadline has been reached. You would just re-write your announcement letter. Realty Exchangers, Inc provides you with the Identification form that you will need to give to the IRS when you close on your Relinquished property. If you close on any Replacement Property before your 45 day deadline is reached, you do NOT have to Identify them with the form.
180 day Closing Deadline. This deadline also begins when you close on your Relinquished property. You have half a year to close on your Identified Replacement properties, which should be ample time to complete this task. If you do not close on all of your Identified Replacement Properties before this date is reached, you could end up paying Capital Gains Tax on all un-spend proceeds.
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How do I pay Realtor commissions if I 1031 exchange one property for another?
Just like most property sales that include a closing agent, whether it be a Title/Escrow Company, Attorney or CPA, the commissions that get paid to Realtors are considered part of the closing costs. When you execute a 1031 Exchange all of the fees that are incurred for the property sale including, the title insurance, deed, broker's fees, state fees, tax, qualified intermediary fees, outstanding mortgages, liens and whatever else needs to be settled at the close of sale are paid from the gross sale proceeds. Once all of the debts are paid, the remaining net proceeds become the proceeds that can then be used to purchase your 1031 Exchange Replacement Properties.
Related Info: commissions, realtor, fees, proceeds, sale, paid, closing, whatever
How do I find a Realtor in my area that can handle 1031 Exchange?
So you closed sale on your Relinquished Property and you're ready for the next phase of your 1031 Exchange, which is FINDING REPLACEMENT PROPERTIES. First, make sure you visit our 1031 Exchange Replacement Search Engine, located at http://www.exchangersclearinghouse.com, then the next step is use our 1031 Professionals Directory located at http://www.realtyexchangers.com/1031_Exchange/index.html and find a Realtor who can help you find just the right Replacement Properties. Each and every Realtor on this list is a seasoned-pro with 1031 Exchanges. We've worked with them and can vouch for their knowledge and expertise.
Related Info: area, realtor, replacement, properties, located, http//wwwrealtyexchangerscom/1031exchange/indexhtml, list
How much does a 1031 Exchange cost?
Qualified Intermediaries charge anywhere from $300 to $3000 per 1031 exchange. Like most industries the prices are market driven, when demand is high prices go up, and the reverse when demand goes down. Realty Exchangers is a 20-year Qualified Intermediary for IRS 1031 Exchange. Our prices have always been in balance with current market conditions. Our company charges fees for each closing on a 1031 Exchange. When you sell your Relinquished Property (the property you intend to sell), we charge $295 for the documents required to close this sale. Then, when you are ready to close on your 1031 Exchange Replacement Properties, Realty Exchangers charges $200 for the documents necessary to each closing.
So a complete 1031 Exchange, with one property sold and one property bought is $495.
PLEASE NOTE.
The prices given in this posting are subject to change. Please visit our Fees page for current pricing on our 1031 Exchanges.
So a complete 1031 Exchange, with one property sold and one property bought is $495.
PLEASE NOTE.
The prices given in this posting are subject to change. Please visit our Fees page for current pricing on our 1031 Exchanges.
Related Info: cost, prices, exchangers, realty, current, charges, documents
Help! My 45 day deadline is tomorrow. Can the IRS give me an extension?
The IRS was very specific concerning the deadlines surrounding 1031 Exchange. You have 45 calendar days from the date you closed sale on your Relinquished Property to "Identify" your 1031 Exchange Replacement Properties. There is no mention of requesting an extension on the 45 day date or the 180 day date. So, the answer is no.
The best advice is to contact a 1031 Exchange Realtor IMMEDIATELY and have them help you find a property. Failure to "identify" your Replacement Properties within the 45 day deadline will terminate your 1031 Exchange.
The best advice is to contact a 1031 Exchange Realtor IMMEDIATELY and have them help you find a property. Failure to "identify" your Replacement Properties within the 45 day deadline will terminate your 1031 Exchange.
Related Info: extension, give, deadline, date, identify, properties, replacement, realtor, advice
I already sold my rental home. Is it too late to 1031 exchange it?
A 1031 Exchange happens at the closing of sale on Relinquished and Replacement Properties. This is usually when the transfer of title happens. If in the case of a property that you already closed sale on and transferred the title, no, you cannot 1031 Exchange it for something else. However, if you haven't completely closed sale on your property and title hasn't transferred and you haven't accepted the proceeds, there is still time to 1031 Exchange your property. If you find yourself in this situation where you haven't completely closed on your investment or business property, please call your Qualified Intermediary today at 800-570-1031.
Related Info: home, rental, title, closed, haven't, sale, completely, transferred
How do I do a 1031 Exchange?
We've been reading countless daily internet articles explaining the benefits and the whys of an IRS 1031 Exchange. The reasons why someone should do a 1031 Exchange are quite simple, the taxpayer wants to defer their capital gains tax. But what about how? How do you do a 1031 Exchange?
1. Own Qualified Real Estate.
Make sure you have real estate that qualifies for 1031 Exchange. Make sure you or your business owns either investment real estate, such as land. Or, real estate held for business use, such as a rental property or an office complex. Careful consideration of your property must be taken into account. Do not be fooled by individuals telling you you can 1031 Exchange your primary residence or property you purchased yesterday with the intent to flip tomorrow. This is a horrible trap. Consult your CPA for more information.
2. Find a buyer
Realty Exchangers has two very popular venues for finding buyers of your property and finding 1031 Exchange pros who know how to make all happen. Visit our 1031 Exchange Property Search Engine to find looking at http://www.exchangersclearinghouse.com. You can also look up a local professional with our 1031 Exchange Pro Directory located at http://www.realtyexchangers.com/1031_Exchange/index.html. Both of these services are free!
3. Accept the and write up a purchase and sale agreement.
Work with your buyer and attorney to make sure all parties are happy with the offer and that all contingencies are considered. Be sure to inform the buyer that this is a 1031 Exchange.
4. Contact a closing company.
Finding the right closing/title company can be a chore. Your attorney or real estate agent may have some ideas of which closing company to use, better to find one that knows how to handle 1031 Exchanges.
5. Setup a 1031 Exchange with a Qualified Intermediary. (QI)
Choosing your 1031 Exchange QI is important. You need one with experience and integrity. Realty Exchangers has been providing 1031 Exchange QI services since 1989. In over 20 years, we helped thousands of tax payers defer their capital gains tax. We are the experts at making the transaction simple and easy.
6. Close sale on your property and transfer your proceeds into your QI's trust.
When you sale closes, you closing company is directed to transfer the proceeds from your 1031 exchange into your QI's trust account. Here the funds will sit while you search for your 1031 Exchange Replacement Property.
7. Know your 45 day and 180 day deadlines.
Soon as the sale closes on your Relinquished Property the clock starts ticking on securing qualified Replacement Properties.
45 day Identification Period. The IRS stipulates that you have 45 days to officially "Identify" your replacement properties. This must be done in writing and Realty Exchangers provides you with the forms necessary.
180 Closing Deadline. The IRS also stipulates that you have 180 to close sale on ALL of your identified replacement properties.
8. Identify your Replacement Properties.
Use the same web site tools mentioned in number 2 above. These must be of like-kind, meaning they must follow the same qualifications test as mention in step 1. The number of Replacement Properties you can chose, depends on which rules you want to follow. The 3 property rule, the 200% rule or the 95% rule. The most popular is the 3 property rule because it is the easiest for most people to understand.
9. Close on your Replacement Properties.
Essentially, this step is the same as steps 3 and 4, mentioned above.
That is all there is to it.
Realty Exchangers takes pride in keeping this process as clean and simple as possible. Only when you attempt to circumvent the above steps do you invite trouble with your 1031 Exchange. You have two options with the IRS. Pass or Fail. If you follow the rules, your Exchange will pass and you will defer your capital gains. Failure to follow the rules or attempts to circumvent the process creates issues that can force your Exchange to collapse.
And always, if you have questions, the best option is to call Realty Exchangers at 800-570-1031.
1. Own Qualified Real Estate.
Make sure you have real estate that qualifies for 1031 Exchange. Make sure you or your business owns either investment real estate, such as land. Or, real estate held for business use, such as a rental property or an office complex. Careful consideration of your property must be taken into account. Do not be fooled by individuals telling you you can 1031 Exchange your primary residence or property you purchased yesterday with the intent to flip tomorrow. This is a horrible trap. Consult your CPA for more information.
2. Find a buyer
Realty Exchangers has two very popular venues for finding buyers of your property and finding 1031 Exchange pros who know how to make all happen. Visit our 1031 Exchange Property Search Engine to find looking at http://www.exchangersclearinghouse.com. You can also look up a local professional with our 1031 Exchange Pro Directory located at http://www.realtyexchangers.com/1031_Exchange/index.html. Both of these services are free!
3. Accept the and write up a purchase and sale agreement.
Work with your buyer and attorney to make sure all parties are happy with the offer and that all contingencies are considered. Be sure to inform the buyer that this is a 1031 Exchange.
4. Contact a closing company.
Finding the right closing/title company can be a chore. Your attorney or real estate agent may have some ideas of which closing company to use, better to find one that knows how to handle 1031 Exchanges.
5. Setup a 1031 Exchange with a Qualified Intermediary. (QI)
Choosing your 1031 Exchange QI is important. You need one with experience and integrity. Realty Exchangers has been providing 1031 Exchange QI services since 1989. In over 20 years, we helped thousands of tax payers defer their capital gains tax. We are the experts at making the transaction simple and easy.
6. Close sale on your property and transfer your proceeds into your QI's trust.
When you sale closes, you closing company is directed to transfer the proceeds from your 1031 exchange into your QI's trust account. Here the funds will sit while you search for your 1031 Exchange Replacement Property.
7. Know your 45 day and 180 day deadlines.
Soon as the sale closes on your Relinquished Property the clock starts ticking on securing qualified Replacement Properties.
45 day Identification Period. The IRS stipulates that you have 45 days to officially "Identify" your replacement properties. This must be done in writing and Realty Exchangers provides you with the forms necessary.
180 Closing Deadline. The IRS also stipulates that you have 180 to close sale on ALL of your identified replacement properties.
8. Identify your Replacement Properties.
Use the same web site tools mentioned in number 2 above. These must be of like-kind, meaning they must follow the same qualifications test as mention in step 1. The number of Replacement Properties you can chose, depends on which rules you want to follow. The 3 property rule, the 200% rule or the 95% rule. The most popular is the 3 property rule because it is the easiest for most people to understand.
9. Close on your Replacement Properties.
Essentially, this step is the same as steps 3 and 4, mentioned above.
That is all there is to it.
Realty Exchangers takes pride in keeping this process as clean and simple as possible. Only when you attempt to circumvent the above steps do you invite trouble with your 1031 Exchange. You have two options with the IRS. Pass or Fail. If you follow the rules, your Exchange will pass and you will defer your capital gains. Failure to follow the rules or attempts to circumvent the process creates issues that can force your Exchange to collapse.
And always, if you have questions, the best option is to call Realty Exchangers at 800-570-1031.
Related Info: , replacement, properties, estate, exchangers, sale, real
Do I have to use the same debt and equity ratio on each Replacement property?
Remember that the tax accounting math for the 1031 exchange requires you to add the Replacement Properties together and treat as "one property" when figuring the exchange numbers. There are no "ratios" to worry about. Just be sure your Qualified Intermediary knows how to deal with multiple Replacement Properties.
Related Info: replacement, ratio, equity, debt, properties, numbers, ratios, multiple, figuring
How easy is it to sell my commercial building and 1031 exchange into smaller office complex?
You could structure your transaction to qualify for 1031 exchange treatment depending on the cost of the Replacement Property (Office Complex).
You have 3 options when it comes to purchasing your replacement properties;
The 3-Property Rule
The maximum number of replacement properties you may identify is three properties without regard to fair market values of the properties.
The 200 Percent Rule
You may identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties.
You figure fair market value of Replacement Property as of the end of the identification period. You figure fair market value of Relinquished Properties as of the date you transfer them.
If, as of the end of the identification period, you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified.
The 95 Percent Rule
You may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties
You have 3 options when it comes to purchasing your replacement properties;
The 3-Property Rule
The maximum number of replacement properties you may identify is three properties without regard to fair market values of the properties.
The 200 Percent Rule
You may identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties.
You figure fair market value of Replacement Property as of the end of the identification period. You figure fair market value of Relinquished Properties as of the date you transfer them.
If, as of the end of the identification period, you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified.
The 95 Percent Rule
You may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties
Related Info: complex, office, smaller, building, commercial, properties, replacement, market, fair, value, rule
My biggest worry about doing a 1031 Exchange is the 45 day deadline. Help?
Yes, you have 45 days to identify Replacement Properties once you convert your sale into a 1031 Exchange. You are right that doesn't seem like a lot of time. We encourage to you find a local 1031 Exchange Real Estate Professional who can help you find some qualified replacements. Careful planning before you sell your property is not out of the question. Many people already have replacement properties in mind before they sell but if you do not a great place to look in on-line. Try the Exchangers Clearinghouse, our national 1031 Exchange Property Search Engine, it's free! We have new listings being added daily, so check back often.
Related Info: deadline, replacement, clearinghouse, national, exchangers, on-line, properties
Can I 1031 Exchange my interest in a business for interest in another business?
Partnership interests are specifically excluded from 1031 exchange treatment. A partner's exchange of an interest in one partnership for another partner's interest in a different partnership does not qualify for 1031 exchange. However, please note that this IRS rule does not apply to exchanges of interests in the same partnership.
You should also know that a partnership as a business entity can qualify to exchange real estate it owns for other real estate.
For example: A limited partnership owned land and an office building leased under a long-term lease. The limited partnership wanted to dispose of the land and building and acquire several parcels of real estate. It located someone interested in buying the land and building. The limited partnership proposed to transfer title directly to a Qualified Intermediary and then form separate entities to take title from the QI for each of the replacement properties. The limited partnership would be the sole owner of each "replacement entity.” These entities would then either elect to be disregarded as an entity or would rely on the default classification for single-owner entities.
For discussion of strategy using §1031 to Split Up Partners and Investors in Real Estate see Topic 11.
You should also know that a partnership as a business entity can qualify to exchange real estate it owns for other real estate.
For example: A limited partnership owned land and an office building leased under a long-term lease. The limited partnership wanted to dispose of the land and building and acquire several parcels of real estate. It located someone interested in buying the land and building. The limited partnership proposed to transfer title directly to a Qualified Intermediary and then form separate entities to take title from the QI for each of the replacement properties. The limited partnership would be the sole owner of each "replacement entity.” These entities would then either elect to be disregarded as an entity or would rely on the default classification for single-owner entities.
For discussion of strategy using §1031 to Split Up Partners and Investors in Real Estate see Topic 11.
Related Info: business, interest, partnership, limited, real, estate, entity, entities
