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Monday, February 20, 2012

1031 Exchanges Grass Valley Nevada City

1031 Exchange Process: Step By Step

Investors unfamiliar with 1031 Exchanges may envision the process as being intimidating and difficult. In reality, it doesn’t have to be. In order to successfully complete an exchange, investors must simply follow the following basic steps:
  1. Set up an Exchange Account with a 1031 Exchange Company - The 1031 Exchange account MUST be opened before close of escrow on the property being sold. Waiting until the last minute is not recommended, but some companies can open a ‘rush’ account if necessary.
  2. Insert the Appropriate Language into the Sales Contract - The appropriate 1031 language should be added to the Purchase & Sale contract for the property being sold. A 1031 Exchange company will provide all  language if necessary.
  3. Execute the Exchange Agreement - At the close of escrow, the 1031 Exchange company will coordinate with the escrow company to obtain all of the necessary signatures on all exchange documentation.
  4. Locate Replacement Property - The most difficult process of the exchange can often be finding the right replacement property within the required timeframe. The IRS requires that potential replacement property is identified on or before day 45 of the exchange and property must be acquired on or before day 180 of the exchange.
  5. Submit 45 Day Identification Letter - The Identification Letter MUST be submitted no later than day 45 of the exchange. All potential replacement properties must be identified in writing in an unambiguous manner.
  6. Request Funds for Deposits - Money for deposits can be disbursed from the exchange account. Clients are required to send the 1031 Exchange company the “Disbursement Form” indicating how much money needs to be distributed and to whom. Deposits can also come from the clients personal funds and then reimbursed to the client at the closing of the property.
  7. Obtain Appropriate Signatures - At the close of escrow of the replacement property, 1031 Exchange company will work with the new escrow company to obtain all appropriate signatures for all exchange documentation. Depending on the nature of the transaction, additional steps may need to take place. The 1031 Exchange company will work closely with the client to ensure a successful transaction.  

    I can help you with your 1031 Exchanges and refer you to a 1031 Exchange company. Please contact me today to get started.

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