Section 1031 Exchange
One of the most important things to note about the Section 1031 exchange is the timeline requirement. As soon as the sale is closed on the relinquished property, the 45-day identification period begins. During this 45-day period, a like-kind replacement property must be identified. Candidate properties must be identified to the Internal Revenue Service (IRS).
This time period does provide some flexibility, as you can choose to replace an identified replacement property with a different property during the identification period. To do so, you simply revoke the original identification and identify the new candidate property. You may target up to three different properties or a group of properties. If you choose to identify a group of properties, their combined value cannot exceed 200 percent of the value of the property you originally sold or you can identify any number of properties but must close on 95 percent of the properties identified.
The identification of like-kind property is imperative for the success of the section 1031 exchange. If no replacement properties are identified by the end of the 45th day, the investor will not be able to take advantage of a 1031 exchange and capital gains taxes must be paid.
The second part of the 1031 exchange timeline is a period of 180 days from the close of escrow on their relinquished property. During this time, the investor must acquire at least one of the identified replacement properties. If no designated transaction is completed within this 180-day period, the investor will be responsible for paying capital gains tax on the original property sale proceeds.
To take advantage of the benefits of a section 1031 exchange, appropriate property must be found in a timely manner. We at TM 1031 Exchange maintains a database of hundreds suitable properties. For more information about locating 1031 properties, contact us by phone toll-free at 1-877-4TM-1031 or by e-mail here firstname.lastname@example.org.