What are the steps of a 1031 Exchange?
REVIEW: Review the entire transaction with tax and/or legal advisors.
SALE CONTRACT: Enter into an “assignable” contract to sell relinquished property with 1031 exchange cooperation language
EXCHANGE DOCUMENTS PREPARED: Send a copy of the sales contract to Legal 1031. Legal 1031 will prepare the 1031 exchange documents necessary for the sale of the relinquished property. If any proceeds from the sale will not be used toward the purchase of replacement property that amount must be identified in the exchange documents and this amount may be subject to tax.
EXECUTE EXCHANGE DOCUMENTS: Exchanger must sign all exchange documents and the purchaser of the relinquished real estate must sign the assignment agreement. Executed documents must be signed at, or prior to, the closing.
RELINQUISHED PROPERTY CLOSES: Exchange proceeds are transferred from the closing via wire transfer or check to a separate segregated escrow account set up by Legal 1031.
IDENTIFICATION OF REPLACEMENT PROPERTY: Exchanger has 45 days from the sale to identify replacement property, and 180 days from the sale to close on the identified property. Identification of replacement property documentation must be completed by Exchanger and forwarded to Legal 1031 by the 45th day after the first relinquished property has sold.
PURCHASE CONTRACT: Enter into an “assignable” contract to purchase replacement property with 1031 exchange cooperation language . The Exchanger must be the same taxpayer, pursuant to the IRC §1031 code, regulations and rulings, on both the relinquished property and the replacement property.
EXCHANGE DOCUMENTS PREPARED FOR REPLACEMENT PROPERTY: Send a copy of the purchase contract(s) to Legal 1031. Documents must be prepared for all replacement properties.
EXECUTE EXCHANGE DOCUMENTS: Exchanger must sign all exchange documents and the seller of the relinquished property must sign the assignment agreement. Executed documents must be sent to Legal 1031 prior to the closing. All documents should be completed by Exchanger and Seller before we may process any Request for Funds for the deposit of the replacement property.
REPLACEMENT PROPERTY CLOSES: Inform Legal 1031 when a closing date has been established. Complete a Request for Funds form with date that the wire transfer or check is to be completed.
COMPLETION: If all exchange funds are used to acquire the replacement property or properties, and all the exchange requirements are met, the exchange is complete.