6 things to know

The regulations, court cases, and IRS rulings that apply to your exchange are ever-changing. It is important to choose a QI like The 1031 Exchange Experts that understands these laws, and carefully monitors new legal developments.

The IRS Rules for Exchanges

You will need to follow six primary rules for your exchange to meet stringent IRS regulations.

  1. Real Property Use.

    Gary Gorman Explaining Rule #1

    Both your old and new properties must qualify as investment or business use. If both properties pass this test, you can exchange nearly any type of real estate.

  2. 45 Day Identification Period.

    You have 45 days from the closing of your sale to list the properties you may want to buy. There are no exceptions to the deadline.

  3. 180 Day Exchange Period.

    From the sale closing date, you have 180 days to close on the purchase of one or more properties from the 45-day list. Again, there are no exceptions to this deadline.

  4. Qualified Intermediary (QI).

    Gary Gorman Explaining Rule #4

    The IRS mandates that you use a QI to prepare the legal documents for your exchange. Because the QI must be independent, it cannot be your friend, employee, broker, or even your accountant or attorney. The QI also holds your money, so that you do not have access to it.

  5. Proper title holding.

    You must purchase and take title to your new property exactly as you held title to your old property.

  6. Reinvestment Requirement.

    To defer all of your capital gain tax, you must buy a property equal or higher in value than the one you sold. Also, you must reinvest all of the cash proceeds from your sale.

"It is our pleasure to endorse your company, The 1031 Exchange Experts..."

After 5 transactions, we have been very satisfied with the smooth and professional manner in which you have handled these accounts. We are looking forward to continuing this with future transactions. With your knowledgeable team of Experts, it makes the transaction smooth.

Edna & Sherman Heck
1031 Investors
Forked River, NJ

What happens if you identify 3 properties within the 45 days, but do not close on any of them?
Tony Petruccione
Coldwell Banker Beaver Creek

Dear Tony,
Once you have identified the 3 properties within the 45 days, you must close on 1 or more of those properties. This closing(s) must take place by day 180 from the date of the sale of the old property. If you don't close on any of them within the 180 day deadline. that means the exchange fails, and is now a taxable event to you. There are no additional penalties assessed.
The 1031 Exchange Experts