This is the second of three blog entries about the basics of Section 1031 exchanges. The first entry can be found here: Article #1

Quick review... the first hurdle for the standard exchange is that the properties must qualify. Moving on...

#2 - Establish your intent to exchange. Now that you have determined that the property you are selling and a property you can envision buying will qualify, you must enter into a written agreement with your exchange company to establish your intent to exchange. This must be done prior to the closing of the sale of your property. At closing, as required by Section 1031 regulations, the proceeds are delivered directly to your exchange company to be held in trust during the exchange.

#3 - Identify the property to be purchased. After closing, you have 45 calendar days to identify the property to be purchased. I prefer to explain this rule by saying that you have all of the time before your old property sells and closes plus 45 days after the closing to make the identifications. Generally, you may identify three properties as potential replacement property and you may acquire one, two or all three of those properties. There are no restrictions on the values of the properties, either individually or in the aggregate. There are alternate rules of identification, but most exchangers use the Three-Property Rule.

(Article continued in Part 3.)

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Please see the next blog for additional information on Section 1031 basics.

Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

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Copyright © 2009 By Ken Tharp, All Rights Reserved. * Section 1031 Exchanges - The Basics (Article #2) * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.