Concise Overview of 1031 Exchanges - Series I

Concise Overview of 1031 Exchanges - Series I

Concise Overview of 1031 Exchanges

The 1031 Exchange may not always be the right or best solution for your specific situation, so you should consider whether other tax deferral or tax exclusion strategies might be more appropriate and you should always consult with your legal, tax and financial advisors before entering into any real estate transaction, especially a 1031 Exchange.

This article has been written as a concise overview of 1031 Exchanges.  It is only a brief summary to assist you in understanding the very basic 1031 Exchange requirements. You can read an Introduction to Section 1031 Tax Deferred Like-Kind Exchanges for a more complete and in depth explanation of 1031 Exchange transactions. 

1031 Exchange Requirement

The sale and the purchase transactions must be structured properly in order to qualify for tax-deferred treatment under a 1031 Exchange.  The Qualified Intermediary, often referred to in the real estate industry as the 1031 Exchange Accommodator or the 1031 Exchange Facilitator, will complete the necessary legal documents to ensure that you are in compliance will all laws, regulations and rulings.

It is critical that the Qualified Intermediary be be assigned into the Purchase and Sale Agreement or Contract and the Escrow Instructions, if any, prior to the close of your sale and purchase transactions.  Your transaction will not qualify for 1031 Exchange treatment if either transaction closes without your Qualified Intermediary being formally assigned into both transactions.