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Steve Andre
Phone:
510.552.5572
Office:
510.580.6991
Fax:
510.744.3530
License #:
01371685
Email:
steve@steve-andre.com
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What is a 1031 exchange? |
A 1031 exchange is a tax-deferred exchange of "like-kind" properties.It is very similar to a taxable transaction except that before closing on the property being sold, a qualified intermediary, is assigned into the sale contract. The exchange period begins with the transfer of the first property providing the exchanger 45 days to identify, and a total of 180 days to close, on "like-kind" property. The exchange is completed when the intermediary is assigned the purchase and sale contract, utilizes the proceeds received to acquire the replacement property, and instructs the closer to transfer ownership to the exchanger by direct deeding.
Different types of Exchanges Simultaneous Exchange: The property sold and the replacement properties are joined together and must be closed as one transaction or neither can close. Delayed Exchange: An exchange in which the property sold and the replacement property close on different dates but not more than 180 days apart. Reverse Exchange: A reverse exchange occurs when you buy your replacement property before you sell your current property. The IRS does not characterize this as an exchange. "Like-Kind" Property All real property is "like-kind" with all other real property. "Like-kind" refers to how the property is held by the investor. The exchanger must have held the relinquished property for investment or for "productive use in their trade of business" and the intent is to do the same with the replacement property. You can dispose of and acquire any interest in real property other than a home or second residence. Time Periods You must identify the replacement property by midnight of the 45th day following the close of the first leg. The exchanger may identify any three potential replacement properties without regard to their fair market value. You are not required to wait until your first leg closes to identify a property. The replacement property must actually close by midnight of the 180th day following the close of the first leg. |
