1031 Exchange

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Navigating a 1031 exchange requires careful attention to detail and adherence to best practices. Here are some essential do’s and don’ts to keep in mind to accomplish a successful 1031 exchange:

Must Do's in a 1031 Exchange:

In general, a 1031 Exchange will only work if it is planned before you sell your investment property. There are IRS regulations to consider, documentation for you and your buyer to sign, and you must never gain control over the sales proceeds. We can set up your exchange within 1 day, so if you are closing on your investment property tomorrow, call us now, and you can still conduct a seamless 1031 exchange.

Within 45 days of relinquishing the original property, you must identify potential replacement properties to complete the exchange. Call today for more information about the rules and requirements for identifying your replacement property!
To fully defer taxes, you must ensure that all proceeds from the sale of the relinquished property are reinvested into the replacement property. If that does not happen, there is a good chance that the amounts not reinvested will be taxed.
It is highly recommended to employ the services of a qualified intermediary (“QI”) to handle exchange funds and facilitate your 1031 exchange. As a QI, Superior 1031 Exchange is fully equipped to help you achieve a seamless exchange. For more information about using a QI in your 1031 exchange, call us today!
Finalize the exchange by acquiring the replacement property within 180 days of relinquishing the original property OR the date of your next tax filing, whichever comes first. If the date of your tax filing comes before the 180 day period, be sure to file an extension on your taxes, so that you’ll get the additional time to complete your exchange.

Things to Avoid in a 1031 Exchange:

Missing the 45-day identification window to identify your replacement property can result in disqualification of the exchange.
Accessing exchange funds directly can trigger tax liabilities.
Not reinvesting all proceeds from the sale can result in partial tax liability.
Strict identification rules apply, including the 3-property rule, 200% rule, or 95% rule. Ignoring these rules can lead to invalid identification and potential tax consequences.
Missing the 180-day closing deadline for completing the exchange can result in tax liabilities on capital gains. It’s crucial to adhere to all time limits set forth by the IRS.
Thorough documentation is essential for a successful exchange. Failing to maintain accurate records of transactions and correspondence can lead to complications during IRS audits or disputes.
About Us

Navigating IRS Form 8824

IRS Form 8824, commonly known as “Like-Kind Exchanges,” is used to report your 1031 exchange to the IRS. This form is crucial for taxpayers engaged in like-kind exchanges to ensure compliance with IRS regulations. It requires detailed information about both the relinquished property and the replacement property, including descriptions, dates of acquisition and transfer, and fair market values. Additionally, Form 8824 captures any “boot” received or paid, which is non-like-kind property or cash exchanged as part of the transaction. Proper completion of Form 8824 is essential for taxpayers seeking to defer capital gains taxes on the exchange of property, making it a critical component of the 1031 exchange process.

When completing IRS Form 8824, accuracy is paramount. Ensure that your tax preparer fully understands its intricacies and that they attach it to your tax return for full compliance.

https://www.irs.gov/instructions/i8824

https://www.irs.gov/pub/irs-pdf/f8824.pdf

Released in February 2008, the IRS Fact Sheet offers essential guidance on like-kind exchanges. Check it out here: https://www.irs.gov/pub/irs-news/fs-08-18.pdf

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