Follow six primary rules for your exchange to meet stringent IRS regulations:

  1. Real Property Use. Both your old and new properties must qualify as investment or business use. If both properties pass this test, you can exchange nearly any type of real estate.
  2. 45 Day Identification Period. You have 45 days from the closing of your sale to list the properties you may want to buy. There are no exceptions to the deadline.
  3. 180 Day Exchange Period. From the sale closing date, you have 180 days to close on the purchase of one or more properties from the 45-day list. Again, there are no exceptions to this deadline.
  4. Qualified Intermediary (QI). The IRS mandates that you use a QI to prepare the legal documents for your exchange. Because the QI must be independent, it cannot be your friend, employee, broker, or even your accountant or attorney. The QI also holds your money, so that you do not have access to it.
  5. Proper title holding. You must purchase and take title to your new property exactly as you held title to your old property.
  6. Reinvestment Requirement. To defer all of your capital gain tax, you must buy a property equal or higher in value than the one you sold. Also, you must reinvest all of the cash proceeds from your sale.
 

4 Comments on 6 Rules For 1031 Exchanges

DEC
04
2006
2 Featured Posts
Excellent blog, concise and informative.  So many are too lengthy to read.  I will cut and paste this one.  Thanks alot Chris.  I hope you don't mind, I'm going to add you to my assoicate list so I can look in our your blogs in the future.
6:31am • #1
416,892 Points 63 Featured Posts Outside Blog
Cheers!
6:46am • #2
153,251 Points 21 Featured Posts Localism Sponsor

Don't the properties need to be similar in characteristics as well? I.E. You can't exchange a home for a 40 unit complex...

Scott
7:20am • #3
MAY
22
2007
Any real property held for investment or productive use in a trade or business is "like-kind" in a 1031 exchange.  Meaning a rental home can be swapped for a 40 unit complex, or raw land, or an office etc..
Jeff
11:02am • #4

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Chris Elizabeth Griffith ~ Bonita Springs Fl Real Estate

Bonita Springs, FL

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Downing-Frye Realty, Bonita Springs, FL

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