1031 Exchange
NINE STEPS TO A SUCCESSFUL 1031 TAX-DEFERRED EXCHANGE
1. TAX ADVISOR: Consult with you tax or financial advisor to determine if a tax-deferred exchange is appropriate for your circumstances and compatible with your investment goals.
2. LIST PROPERTY: List the property with a licensed Real Estate Broker and include "intent to exchange" disclosure in the listing agreement.
3. BUYER COOPERATION: In the purchase agreement for the Relinquished Property, have provisions included requiring the Buyer to cooperate with the exchange (at no expense to the Buyer).
4. OPEN ESCROW AND COORDINATE WITH FACILITATOR: When escrow is opened on the relinquished property, contact the Facilitator to prepare the exchange agreement and necessary amendments.
5. RELINQUISHED PROPERTY CLOSING: All exchange documentation will be sent to escrow by Facilitator and must be executed (signed) by all parties to the transaction prior to transfer of the Relinquished Property to the Buyer.
NOTE: The close of escrow of the Relinquished Property and the receipt of the net proceeds by the Facilitator completes Phase I of a tax-deferred exchange.
PURCHASE OF REPLACEMENT PROPERTY
6. IDENTIFICATION DEADLINE: Within 45 days from the close of escrow of the Relinquished Property, all "Like Kind" Replacement Properties must be identified and the Facilitator must be notified in writing.
7. SELLER COOPERATION: In the purchase contract for the Replacement Property include provisions requiring the Seller to cooperate with the exchange (at no expense to the Seller).
8. OPEN ESCROW AND COORDINATE WITH FACILITATOR: The Facilitator prepares all Phase II exchange documentation and coordinates with the escrow holder. At the instruction of the Facilitator, the escrow holder deeds the Replacement Property from the Seller directly to the Exchanger. The funds held in trust by the Facilitator are placed in escrow and the Facilitator purchases the Replacement Property from the seller.
9. ACQUISITION DATE: Close escrow on the Replacement Property within 180 days from the transfer of the Relinquished Property. The Replacement Property must be acquired prior to filing your tax return for the year the Relinquished property was transferred. An extension to your tax return may be necessary.
IMPORTANT:To be fully tax deferred, acquire replacement property equal or greater in value, equity and debt(unless additional cash is added to offset debt relief).
