How to Start a 1031 Exchange
A 1031 exchange allows the owner of an investment property to sell it and buy a like-kind property while deferring capital gains tax. The first step to starting a 1031 exchange is to contact a professional for assistance. The 1031 exchange process can be complicated and stressful without skilled guidance. At 1031 Federal Exchange, our experienced team provides the comprehensive services you need for a smooth 1031 exchange from start to finish.
The IRS dictates the order of operations in the 1031 exchange process. To qualify for tax-referral, investors must use a qualified intermediary (QI) and follow the rigid 1031 exchange rules and timelines set forth by the IRS. A QI with extensive experience can help ensure the IRS rules and timelines are strictly followed.
There are three important dates to remember in the 1031 exchange timeline:
- Day 0: Date of closing on relinquished property, also called existing or original property.
- Day 45: Replacement property or properties must be identified within 45 days of closing on relinquished property.
- Day 180: Closing on replacement property must take place within 180 days of closing on relinquished property.
How Does a Reverse 1031 Exchange Work?
Reverse 1031 exchanges are more complicated than other tax-deferred exchanges and require the guidance of a skilled QI. In other 1031 exchanges, such as delayed or simultaneous exchanges, an investor sells a property and then purchases a new one with the proceeds from their original property sale. The process is reversed and involves more complex tax-deferred strategies when a QI facilitates a reverse 1031 exchange.
An exchange accommodation titleholder (EAT) is also used to acquire and hold what is referred to as the “parked property.” Next, the EAT takes the title to either the relinquished property or replacement property under a qualified exchange accommodation arrangement (QEAA).
The same 45-day identification period and 180-day exchange period timeline provided by the IRS apply to reverse 1031 exchanges. The rules require that written identification be delivered to the QI or EAT, the identified relinquished property be sold, and the parked replacement property be transferred to the investor to complete the exchange within 180 days of parking the replacement property. The investor may never own both the relinquished and replacement properties at the same time.
There are many missteps that can disqualify an investor swapping like-kind properties. It can also be challenging and time-consuming to find, select, and acquire suitable exchange properties that best align with your real estate and financial goals. Our team at 1031 Federal Exchange can create an individualized plan that suits your goals.
1031 Federal Exchange Provides Top-Rated and Fully Integrated 1031 Exchange Services
For trusted and reliable 1031 exchange services, contact 1031 Federal Exchange. Our experienced team can help determine what type of exchange is right for you. Call us at 513-488-1135 or fill out our online form to schedule a free consultation. Located in Loveland, Ohio, we serve clients nationwide.