1031 Exchange Quick Facts
1031 Exchange Reinvestment Requirements
- Trade Equal or Up In Value
The total price of the Investor’s like-kind replacement properties must be equal to or greater than the net sales price of the Investor’s relinquished properties; this is accomplished by exchanging equal or up in value based on the net sales price and total purchase price. Take note: the Investor’s equity is not a factor.
- Reinvest 100% of Net Proceeds
Any monies acquired as a result of the sale of relinquished property has been sold must be reinvested into like-kind replacement property; funds can be extracted, but are taxable in all instances.
- Obtain Equal or Greater Debt
The appropriate amount of new debt to place on new properties is the difference between the net proceeds reinvested in the like-kind replacement properties and the total purchase price; the only exception is if the Investor obtains less debt by paying more personal monies up front.
1031 Exchange Structures
- Simultaneous or Concurrent 1031 Exchange
In a Simultaneous 1031 Exchange the like-kind replacement property and the relinquished property close simultaneously.
Forward, Delayed, or “Starker” 1031 Exchange.
The Investor’s like-kind replacement property is bought immediately after the relinquished property is closed upon. Set deadlines of a Delayed 1031 Exchange must be adhered to.
The relinquished property is sold after the like-kind replacement property is acquired and "parked" by a Qualified Intermediary. Set deadlines of a Delayed 1031 Exchange must be adhered to.
Build-to-Suit (Improvement or Construction) 1031 Exchange
The Investor’s like-kind replacement property can be improved/renovated using excess 1031 Exchange funds from the sale of their relinquished property if such funds exist.
Personal Property 1031 Exchange
Non-real estate personal property can be traded for personal property of the same classification.
1031 Exchange Identification Rules
A maximum of three possible like-kind replacement properties may be introduced/identified by the Investor; the fair market value of the properties is not a factor.
200% of FMV Rule
The Investor can select an unlimited amount of possible like-kind replacement properties; however, 200 percent of the fair market value of the relinquished properties is the maximum that the total fair market value of said properties can equal.
The Investor can select an unlimited amount of like-kind replacement properties; however, they much take possession of and close on 95 percent of the fair market value indicated.
1031 Exchange Qualifications
The tax-deferred benefits of a 1031 Tax Deferred Exchange can only be utilized if the Qualified Intermediary has been selected and assigned to your sale before the transactions close.
Qualified Use Property
In order to qualify for a 1031 Exchange, the Investor’s like-kind replacement property and their relinquished property must be used in their trade or business or held for investment rental; if the property will not qualify for 1031 Exchange treatment if it is held for sale.
Like Kind Property
Replacement property acquired in a 1031 Exchange and the relinquished property must both be of "like-kind" status, i.e. both properties must be held for rental, investment or business.
1031 Exchange Deadlines
The Investor has 45 calendar days to select possible like-kind replacement property.
The Investor has 180 calendar days to finish a 1031 Exchange.
Disclaimer: 1031 exchange made simple does not guarantee the performance of the QI's in our referral network and we can not be held liable for any misrepresentations or mistakes in regards to a 1031 exchange by one of the QI's that we refer to you. 1031 Exchange made simple does not provide tax advice nor can we make representations regarding the tax consequences of an exchange transaction. 1031 Exchange made simple is a 1031 QI Referral Network. 1031 made simple is not responsible (in any way) for the performance, creditability, and financial condition of any QI in our network. In this new economic environment it is imperative that all potential 1031 exchange customers do their own due diligence and research on any QI that they may use, on a 1031 exchange. Please verify and check the validity of the Bonding and Insurance of your QI. It may be wise to have your 1031 exchange accounts set up as separate, individual customer accounts. Our web site is to be used as a information based web site only. All parties doing a 1031 exchange must consult their tax advisors or attorney for this information.
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