4 Ways to Not Have a 1031 Horror Story
Did you know that October 31st has two holidays? The first is Halloween and the second is National 1031 Exchange Day! (Get it, 10/31? 😂)
Let us share some of the common horror stories that taxpayers can avoid surrounding 1031 Exchanges.
Here are 4 ways to avoid having a 1031 Horror Story
START YOUR EXCHANGE BEFORE CLOSING. One of the requirements of a 1031 Exchange is that a taxpayer must sign an Exchange Agreement with a Qualified Intermediary, like Security 1st Exchange, before the closing of the relinquished property. Unfortunately, is it common for a taxpayer to call us days or weeks after a closing requesting to set up a 1031 Exchange. Since the closing has already occurred, we are unable to assist with the 1031 Exchange.
IDENTIFY REPLACEMENT PROPERTY WITHIN 45 DAYS. Once a taxpayer closes on their relinquished property, they have 45 calendar days to identify in writing with the Qualified Intermediary what they intend to purchase. Please do not forget to identify replacement property using the Identification Form provided by the Qualified Intermediary on or before the 45th day, or we will be unable to assist with any acquisition.
DISCLOSE YOU ARE BUYING OR SELLING FROM A FAMILY MEMBER. There are very specific rules when a taxpayer wants to sell or purchase from a Related Party. Please let us know before setting up a 1031 Exchange that there will be Related Parties involved in the transaction so that we can provide the taxpayer with the best information, and they can consult with their tax advisor to strategize how to move forward.
COMMUNICATE. COMMUNICATE. COMMUNICATE. A lack of providing pertinent information to the Qualified Intermediary is the worst thing a taxpayer can do. Let us know everything about the transaction so that we can provide the best information. Almost anything can be solved as long as we know the full scope of the transaction.
1031 Exchanges do not have to be as horrifying as a 1970’s horror movie. Make sure to reach out to us here at Security 1st Exchange to turn that possibly spooky experience into a relaxed one.
As always, any taxpayer should consult with their tax advisor to be assured that they are in compliance with the 1031 requirements for their specific transaction.