1031 Exchange Requirements
There are some basic requirements that 1031 exchanges must meet in order to qualify for the most favorable tax treatment. The first requirement is that the property must be held for "productive use in a trade or business" (according to IRS rules) or for investment. The second is that the property exchanged must be of like kind. Investment real estate within the US generally qualifies for like-kind exchanges. Personal residences do not. A third requirement is that the transaction funds must be handled by a Qualified Intermediary and not by the investor or a related party. The value of the replacement property must be equal to or greater than that of the relinquished property. If there are cash proceeds from the sale, all of the cash must be re-invested in the replacement property. Likewise, if there is a reduction in debt on the replacement property, that reduction must be offset or there will be taxable gains on the transaction. Investors must also comply with timing requirements. The maximum time for identifying a replacement property is 45 days from the date of close on the sale of the relinquished property. The replacement property must then be transferred to the investor within 180 days from the date of the original sale. TM 1031 Exchange maintains a nationwide database of investment real estate suitable for 1031 exchanges. For more information on specific properties or our services, please call 1-877-4TM-1031. You may also send an email here team@tm1031exchange.com or by clicking on the link to a particular property.
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