1031 Exchange Rules
“Am I eligible to perform a 1031 property exchange?”
There are three basic rules to consider:
- Properties must be of “like-kind” and be used for commercial or investment purposes.
- The entity that sells must be the entity that buys.
For example, if the property you wish to sell is currently deeded to both you and your spouse, the replacement property you plan to purchase must also be deeded to you and your spouse.
Do you own the property as part of an LLC, partnership or tenants in common? There are special steps that should be taken to insure you don’t invalidate your exchange. Call us to discuss in more detail.
- Follow the timeline!
- Day 1
- Starts when you sell (or buy) the first property that will be part of the exchange.
- Day 45
- You must identify possible replacement properties by this date, or the exchange will be voided.
- Day 180
- You must close on any/all properties that will be part of the exchange.
Other items that can affect the outcome of your exchange.
Do you currently own the property you’re looking to buy?
Do you have a mortgage on the property your selling?
Do you want to use exchange funds to improve the property you plan to purchase?
Do you want funds from the sale initially?
Have you already identified a replacement property?