Every 1031 exchange is different, but there are a few universal tips that will help ensure a smooth process in a tax-free exchange from start to finish:
- Make sure that the property you are selling (Relinquished Property) and the property you are purchasing (Replacement Property) qualify as investment/business use property. If you are not sure, give us a call, and we can provide you with some information to help you make that determination.
- Remember that the taxpayer on title to the Relinquished Property (individual, trust, corporation, etc.) is the taxpayer that needs to acquire and take title to the Replacement Property.
- Make sure you have a Qualified Intermediary (QI) in place prior to closing the first transaction. Many of the exchanges we get are oftentimes last-minute exchanges because the taxpayer does not realize that they need a QI until they are at the closing. Taxpayers mistakenly assume that if they tell their Realtor® or title closing agent that they want to do an exchange, then the Realtor® or title agent will make sure it gets set up. The responsibility for setting up the exchange is solely on the taxpayer.
- Speaking of Realtors® and title closing agents, make sure that you do keep them in the loop of what your plans are so that there aren’t any last-minute surprises or unexpected delays.
These are just a few tips to hopefully help you and your team when planning for a 1031 exchange. Midland 1031 will be there every step of the way to ensure that your exchange process is as smooth as possible.