1031 Exchange FAQ & Resources
Do I need a Qualified Intermediary (QI aka accommodator)?
Yes. To prevent a taxable sale of the Relinquished Property, it’s essential to use an intermediary in almost every 1031 transaction. Additionally, the Exchanger must establish written agreements with the Qualified Intermediary (QI) prior to selling the Relinquished Property.
What is the definition of Like Kind Property?
Yes, you can purchase any type of business or investment real estate anywhere in the U.S. The 'like-kind' requirement doesn’t mean you have to sell and buy the exact same type of property. Under IRC §1031, you can exchange one real property for nearly any other real property within the United States, as long as it’s held for business or investment purposes. For example, you could sell a rental property and buy apartments, commercial real estate, industrial buildings, mini-storage units, vacant land, agricultural properties, and more.
Is the identification period strictly 45 days?
Yes, unless you qualify for an extension due to a federally declared disaster, the IRS does not offer any extensions or exceptions — even if the deadline falls on a weekend or holiday. The best way to ensure you have enough time is to begin searching for your Replacement Property well before the sale of your property closes, or consider extending the closing date on your sale property.
Can I change my list of identified replacement or relinquish property?
Yes. Within the 45-day period, you can modify your list of identified properties, but once the identification period ends, you can only purchase/sell from the properties you’ve listed. No changes or substitutions are allowed after day 45. The rules under section 1031 are very strict.
Can the Exchange proceeds from the relinquished property be used for renovation of the replacement property?
The day you take title to the replacement property marks the conclusion of the exchange for that property. If there is any remaining cash, it is considered taxable boot. There is also a type of exchange called a Build-to-Suit or Improvement Exchange, where we, as the intermediary, take title to the property to make improvements before you assume ownership. However, this type of transaction is more complex and costly. A reverse 1031 exchange allows you to lease the replacement property back to conduct renovations before the EAT assign the title back to the Exchanger.
All About 1031 Exchanges
