1031 Exchange - Tips For Smooth Transactions
A 1031 Exchange is a great opportunity for the Taxpayer (Exchanger) to get rid of a business use or investment asset by acquiring a Replacement Property and deferring the tax that would ordinarily be due upon the sale.
There are a few extra steps involved when doing a 1031 Exchange, so planning ahead is essential for guaranteeing that the transaction goes smoothly.
Here are some tips courtesy of IPX1031 to follow that will help guide you through the process to a successful exchange.
- Contact the 1031 Exchange company. Before the closing date, as soon as escrow is open or after binding on the purchase and sale agreement, let the 1031 exchange company know of your intent to do an exchange.
- Make sure your real estate agent or attorney includes the “Exchange Cooperation Clause” in the purchase and sale agreement.
- Engage your legal and/or tax advisors to counsel you through the exchange and real estate transactions. Consulting with these advisors is important because the 1031 Exchange company can not give you tax or legal advice.
- Let the 1031 Exchange company know if you plan to make improvements on the Replacement Property or you plan to acquire the Replacement Property before selling the Relinquished Property.
- If you haven’t already, begin your search for the Replacement Property. The time in which you have to identify a Replacement Property is only 45 days from the date the Relinquished Property is transferred.
Timing is very important as certain actions must be taken in sequence and exchanges must be completed within strict time frames.
Contact Wolfert & Wrenn Real Estate Team to help guide you through the 1031 Exchange process.
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