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1031X Exchange Process

The IRS dictates your order of operations. You need to be able to prove that your 1031 exchange follows the rules.

Learn how to set up a 1031 exchange, step-by-step, to enjoy the benefits of tax deferral.

Step-by-Step Tour
Qualification Requirements

Step-by-Step 1031 Exchange Process

1. Contact 1031X

The IRS states you need a Qualified Intermediary to complete your exchange. That’s our job. Tell us about your upcoming sale or purchase, and your Exchange Officer will discuss your options with you. 

We create a one-on-one personalized experience with every client to answer your questions and help you feel comfortable with our partnership.

2. Sign exchange document

Once you give us the go-ahead, you’ll receive a series of electronic agreements to set up your exchange and individual Qualified Escrow Account.

We automate these paperless processes for organization and user-friendliness. Your documents are encrypted for your protection, and we’ll save the content for seven years minimum.

3. Close on your relinquished sale

Closing an exchange sale is more involved than the standard process. We help you coordinate all details, from communicating with the right people to preparing the documents.

Your settlement attorney and escrow officer are two major players here. Once everything is squared away, we will safely escrow your sale proceeds with our partner deposit institution.

4. Identify replacement properties

Knowing how long you have to identify a 1031 replacement property is essential. The internal revenue code requires you to identify your replacement property (or properties) within 45 days of closing your sale.

At 1031X, you can handle identification through our online portal. The secure form tells you all the information needed for easy submissions. During the 45 days, you can replace and delete properties as often as you want.

5. Contract to buy your replacement(s)

When you’ve executed your purchase and sale agreement, let your Exchange Officer know. You’ll sign a brief Assignment of Contract, and 1031X will coordinate with the settlement agent. The steps taken here will let you close on the sale.

6. Close your replacement sale

With everything in order, you’re ready to close. The IRS requires you to complete the close within 180 days of selling your relinquished sale property. Right before closing, you’ll sign a Release Form to authorize the transfer of your escrowed proceeds to the closing table.

7. Enjoy the tax benefits

Your 1031 exchange means you didn’t realize any capital gains tax (according to the IRS tax code). With your new asset, you can start accumulating rental income knowing you’ve saved a pretty penny and can truly optimize your investment property or vacation home. 

Qualification Requirements

While you know how to start a 1031 exchange and complete it, you need to understand the requirements. The 1031 exchange process rules include:

Hire a Qualified Intermediary (like 1031X) to assist your transactions and safeguard your sale proceeds.
Identify up to three potential replacement properties within 45 days of your sale. You can identify more than three, but the process is more complex in these cases.
Close on all 1031 exchange purchases within 180 calendar days from your sale
Acquire a new property (or properties) that is at least as valuable as what you sell. This is net of closing costs, but not of mortgage or other repaid debts.
Retain consistent ownership. The same taxpayer has to be on the title for the sale and purchase.
Frequently Asked Questions
Glossary

Why choose 1031X as your Qualified Intermediary?

Although Qualified Intermediaries are required for every 1031 exchange transaction, here at 1031X, we add value to separate ourselves from the rest. When you work with us, you gain:

  • Automation: As your QI, we’ll pass numerous documents back and forth. With paperless automation, we streamline everything. Plus, our online client portal makes it easy to access documents, identify properties, and chat with our team.
  • Experience: We’ve operated in the world of 1031 exchanges since the ’90s. You can trust our experience, and our connections with real estate professionals can support your success. 
  • Personalized attention: With a designated Exchange Officer, you’ll get the personalized attention you need for a successful exchange. We’ll work to understand your goals, so everything goes according to plan.
  • Security: Our clients’ personal information is always kept confidential using advanced encryption.  All of our clients’ exchange sale proceeds are held in separate, non-commingled Qualified Escrow Accounts.  We aggressively add new security features as threats to real estate investors continue to multiply. 

Learn to Master 1031 Exchanges

Whether you are brand new or need an advanced strategy, this is your go-to center for Section 1031 Exchanges.

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