1031 – Tax Deferal


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.

There are other types of exchanges, such as reverse exchanges, improvement exchanges, and personal property exchanges.

We trust that you have found this brief introduction to 1031 exchanges helpful. If you would like further professional advice or assistance, please do not hesitate to call our offices at Massell Commercial Real Estate at (877) 204-8830.

The information contained herein is for informational purposes only and does not constitute tax, legal or accounting advice. You are advised to seek appropriate professional advice regarding your facts and circumstances.