One of the most important requirements of a successful 1031 exchange is the proper identification of replacement property within 45 days of when the relinquished property is transferred to a buyer. While this requirement seems simple to satisfy, for many, it creates a great deal of stress for a variety of reasons. Following are the most common issues that pop up and tips on how to avoid unnecessary worry.

  

Maximizing your Time

There is no doubt 45 days fly by but there is no reason why you should wait until your relinquished property closes before starting to look for desirable replacement property. On average, there is at least 60  - 90 days between the date an Agreement of Sale is signed and when a property closes. Utilize that time to begin searching for replacement property. The replacement property can be acquired immediately after the relinquished property closes.

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1. Section 1031 Like-Kind Exchanges (LKEs) encourage investment and reinvestment in U.S. assets, and makes it easier for taxpayers to relocate or upgrade into assets that better meet their business needs.
2. §1031 was enacted in 1921 for two primary purposes:
   1) to avoid unfair taxation of ongoing investments in property and 2) to encourage active reinvestment.
3. §1031 has survived numerous tax reform efforts for almost 100 years because 1) it is based on sound tax policy that prevents taxation of cash flow when there is "continuity of investment" and no cashing out, and 2) it stimulates the economy through transactional activity.
4. LKEs have a substantial economic stimulus effect on a myriad of industries, including real estate, contractors, title insurers, lenders, equipment dealers/manufacturers, transportation, energy and agriculture.

January 7th marked the 26th anniversary of 1031 CORP. We are grateful for your loyalty and trust. We could not have reached this milestone without you.

 

Thank you!