This checklist is intended to provide the taxpayer a brief overview of the IRC §1031 exchange process. This checklist does not address all issues involved in an exchange. As a 1031 Qualified Intermediary, we must be independent, and we cannot be your tax advisor or give tax advice. We recommend that you consult with your CPA or tax attorney to decide what is right for you.
- CONTACT LEGAL 1031: The Qualified Intermediary must be involved prior to the sale of the relinquished property. Contact Legal 1031 Exchange Services, Inc. @ (877) 701-1031.
- REVIEW: Review the entire transaction with tax and/or legal advisors.
- SALE CONTRACT: Enter into an “assignable” contract to sell relinquished property.
- EXCHANGE DOCUMENTS PREPARED: Send a copy of the sales contract to Legal 1031. Legal 1031 will prepare the 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, this amount will be subjected to tax.
- EXECUTE EXCHANGE DOCUMENTS: Exchanger must sign all exchange documents and the purchaser of the relinquished property must sign the assignment agreement. Executed documents must be sent to Legal 1031 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.
- PURCHASE CONTRACT: Enter into an “assignable” contract to purchase replacement property. The Exchanger must be the same taxpayer 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.
- 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.