Exchange consulting and Qualifed Intermediary services
We provide exchange services for all your Real Estate investments. From small investment properties to $30 million dollar transactions, we can help. Our fees do not depend on transaction size and start at $1,035 for most 1031 exchanges
While we do not provide legal or tax advice, we can work with your legal and accounting team to structure the most beneficial and tax friendly transaction strategies
Delayed Exchange Basics
Like Kind Property
All 1031 exchanges regardless of the type have a 45-day identification period and a 180-day exchange period. For a 1031 exchange to be valid, your properties must be like-kind. As it pertains to real estate, all real estate is like-kind to other real estate. Some examples would include: an apartment complex exchanged for a cell tower easement; an office building for farm land; or a rental home for water rights. Generally speaking, the only real estate that does not qualify for tax deferralunder a 1031 exchange is a vacation home and personal primary residency.
1031 Exchange time line requirements
You have 45 days after the sale of your relinquished property to identify your replacement property(ies). Identification of replacement properties must be unambiguous, using a legal description or physical address. It must be in writing, dated, signed, and received by your QI within the 45 days. The 45-day requirement is strictly enforced with no option for extension.
Exchange PeriodYou have 180 days after the sale of your relinquished property to purchase your replacement property(ies). The 180-day requirement is strictly enforced with no option for extension. Additionally, your replacement period could be shorter if your tax return due date is prior to the expiration of the 180 days, if that is the case you will want to file an extension on your tax return.
Tax Deferral Requirements
To defer 100% of the capital gains tax and recapture tax liability, two requirements must be met.
1.Reinvest all the cash that was generated from the sale of the relinquished property and;
2. Purchase property equal or greater in value to the relinquished property.The two requirements listed above can be accomplished in a variety of ways. For example, an investor selling a $500,000 rental, with $200,000 in equity, can purchase two $300,000 properties with a $100,000 down payment on each.A partial exchange is also possible. A partial exchange occurs in a trade down situation, where the replacement property is of less value than the relinquished property (i.e. sell for $500,000 buy for $400,000). A partial exchange can result in a partial deferment of the tax liability. Some but not all of the taxes will be owed.
Download our interactive spreadsheet to estimate your tax liability or savings.
Other 1031 Exchange Issues
A reverse exchange can be used when the replacement property is acquired before the replacement property is disposed of. The entire transaction must be completed within the 180 day exchange period. Contact us to determine if this option will work for you and to get a quote on our fees for a reverse exchange
Related Party Exchanges
In general, it is not possible to exchange with a related party. While there are exceptions to the rule you must consult with your tax advisor.
Same Taxpayer Rule
The same taxpayer who owns the relinquished property must acquire the replacement property. While there are exceptions to the rule you must consult with your tax advisor.
Visit our blog for additional information