As soon as you realize that you may qualify for a 1031 exchange, contact a qualified intermediary (QI). Contacting a QI before closing on your relinquished property prevents you from missing the opportunity to enter an exchange. The QI will tell you if you qualify for an exchange and which type of exchange works best. There are several exchange options available to taxpayers, depending on their unique transaction. Here, we discuss definitions, rules, and situations that work best for each type of exchange.
Exchanges (whether standard or reverse/improvement) require advanced preparation. This preparation ensures adherence to regulatory requirements. Pre-planning also gives all involved parties ample time to make the necessary updates to their documentation.
Midland 1031 is available to discuss your transaction with you, and review the exchange process step by step.
Ready to learn more? Contact us today! 239-333-1031
Types of 1031 Exchanges
Forward Reverse Exchange
Reverse Improvement Exchange
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
All real estate can be exchanged as long as it is held for investment or for 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 require that you use a QI to facilitate your exchange. Your QI does three main things: prepares the exchange agreement, escrows the proceeds after closing of the relinquished property, and coordinates the exchange with all closing agents.
To avoid capital gains tax on the sale of your relinquished property, you must spend an amount equal or greater than your net selling price. (NSP equals selling price minus title fees and realtor commissions)
You must close on one or more of your identified replacement properties within 180 calendar days of closing on your relinquished property.