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1031 Exchange


The most commonly used tax-deferral strategy is the Forward Delayed Exchange. In a typical Delayed Exchange, the taxpayer sells a business or investment property and acquires replacement property of equal or greater value within 180 days. The use of a Qualified Intermediary is required to facilitate a valid tax-deferred exchange.

Before you begin the exchange process, be sure to consult with your tax or financial advisor to insure that a 1031 exchange is right for you. Then, contact a Qualified Intermediary to help you complete the exchange process in three easy steps:

Step One: Sale of the Relinquished Property. Before the sale of the first property the Exchanger must add certain facilitating language into the Exchanger's Contract for Sale and complete the additional documentation prepared by the Qualified Intermediary. On closing, the closing proceeds are delivered directly to the Qualified Intermediary

Step Two: Identification of the Replacement Property. The Exchanger must identify the property to be purchased (generally called the “Replacement Property”) within 45 days following the sale of the Relinquished Property. The taxpayer may generally identify up to three properties as a potential Replacement Property, or more subject to certain restrictions.

Step Three: Purchase of the Replacement Property. The Exchanger must obtain the Replacement Property within 180 days following the sale of the Relinquished Property, which must be identified property, subject to the rules listed above. On closing, the closing proceeds are paid directly by the Qualified Intermediary, and the Exchanger receives the Deed to the Replacement Property.


1031 Tax Deferral Strategies for Real Property

What is a 1031 Exchange?

Internal Revenue Code Section 1031 permits the deferral of capital gains and other taxes on the sale of property. In the most common type of exchange, a Forward Delayed Exchange, property is sold and the proceeds are used to purchase replacement property within certain timeframes. To qualify for a safe harbor tax deferral, proceeds should be held with a Qualified Intermediary between the sale and purchase.

Jonathan Aflatouni
email: Jonathan@transglobalre.com