1031 Exchange Rules

There are 5 rules that you must adhere to in a 1031 exchange. Learn about Net Selling Price, What Properties Qualify, What a QI does, the 45-day and 180-day rules.

1031 Exchange Rules

Net Selling Price (NSP)

To avoid capital gains tax on the sale of your relinquished property, you must spend an amount equal to or greater than your net selling price. (NSP equals selling price minus title fees and realtor commissions)

What Properties Qualify

You can exchange all real estate as long as you hold it for investment or productive use in a trade or business. House=Duplex=Land=Condo=Business Land=30-Year Lease=Deed for Deed

You Must Use a Qualified Intermediary (QI)

The regulations state that you use a QI to conduct your exchange. Your QI does three main things. First, they prepare the exchange agreement. Second, they escrow the proceeds after closing on the relinquished property. Third, they coordinate the exchange with all closing agents.

45-Day Rule

To avoid capital gains tax on the sale of your relinquished property, you must spend an amount equal to or greater than your net selling price. (NSP equals selling price minus title fees and realtor commissions)

180-Day Rule

You must close on one or more of your identified replacement properties within 180 calendar days of closing on your relinquished property.

Do You Have Questions?

These 5 rules are just the basics. Our Midland University has video content and webinars that go into greater detail on why to do a 1031 exchange, when you can do a 1031 exchange, and what the process looks like from start to finish.

Midland 1031 is always available to discuss your transaction and review the 1031 exchange process step by step.

Wonder if your situation qualifies? Contact us today!