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TAX DEFERRAL UNDER § 1031
The most commonly used tax-deferral strategy is the Forward Delayed Exchange.
In a typical Delayed Exchange, the taxpayer sells a business or investment
property and acquires replacement property of equal or greater value within 180
days. The use of a Qualified Intermediary is required to facilitate a valid
tax-deferred exchange.
Before you begin the exchange process, be
sure to consult with your tax or financial advisor
to insure that a 1031 exchange is right for you. Then, contact a
Qualified Intermediary to help you complete the exchange process in
three easy steps:
Step One: Sale of the Relinquished Property. Before the sale of
the first property the Exchanger must add certain facilitating language into
the Exchanger's Contract for Sale and complete the additional documentation
prepared by the Qualified Intermediary. On
closing, the closing proceeds are delivered directly to the
Qualified Intermediary.
Step Two: Identification of the Replacement Property. The
Exchanger must identify the property to be purchased (generally called the
"Replacement Property") within 45 days following the sale of the Relinquished
Property. The taxpayer may generally identify up to three properties as a
potential Replacement Property, or more subject to certain restrictions.
Step Three: Purchase of the Replacement Property. The Exchanger
must obtain the Replacement Property within 180 days following the sale of the
Relinquished Property, which must be identified property, subject to the rules
listed above. On closing, the closing proceeds are paid directly by the
Qualified Intermediary, and the Exchanger receives the Deed to the
Replacement Property.
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