Every 1031 exchange is different. However, there are a few universal tips that will ensure a smooth, tax-free 1031 exchange from start to finish:
- The property you sell (Relinquished Property) and buy (Replacement Property) must qualify as investment or business-use property. If you are unsure, contact Midland 1031, and we will provide you with information necessary to make that determination.
- The taxpayer on the title to the Relinquished Property must be the same on the Replacement Property. Whether that taxpayer is an individual, trust, corporation, etc., it must be titled in the same name.
- Make sure you have a Qualified Intermediary (QI) in place before closing the first transaction. Many exchanges are often last-minute because the taxpayer does not realize that they need a QI until they are at closing. Taxpayers mistakenly assume that their Realtor® or title closing agent will set up the exchange. The responsibility for setting up the exchange is solely on the taxpayer.
- Ensure you keep your Realtor® and title closing agent in the loop with your plans to prevent last-minute surprises or unexpected delays.
These are just a few tips for 1031 exchange planning. Midland 1031 will be there every step of the way to ensure that your exchange process is as smooth as possible.