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Frequently Asked Questions

What are the important 1031 exchange rules?
Let’s get you quick answers.

1031X is a “Qualified Intermediary,” which means that we facilitate 1031 exchanges.

By hiring 1031X, investors who sell real estate can use a 1031 exchange to save money and grow their wealth.

After 28 years in the business, our clients have processed $2.5+ billion in successful 1031 exchanges nationwide.

A 1031 exchange is a technique used by real estate investors to defer capital gains tax when they sell an investment property. Also called a “like-kind exchange”, this process is based on Section 1031 of the Internal Revenue Code. When you reinvest your capital gains into another qualified real estate investment, the profit you made from your sale goes unrecognized by the IRS. You get to legally dodge any capital gains tax or depreciation recapture tax.

This process can be an excellent way to optimize your investment strategy and redirect funds to a property with more earning potential. However, you need a qualified intermediary like 1031X to act as an exchange facilitator. Read a more in-depth review of 1031 exchanges, where we spell out the basics and provide examples in simple conversational language.

At 1031X, we offer the following solutions:

  • Forward 1031 exchange: This is the standard approach to exchanges. Sell your investment property and replace it with a like-kind property of equal or greater value.
  • Reverse 1031 exchangePurchase your replacement property first, then relinquish a property you own to complete the exchange. 
  • Construction exchange: Make repairs and/or build new structures to improve your replacement property for use in the 1031 exchange.
  • Custom exchange: Our custom solutions include any process that’s more involved than the above options. You might own a property with multiple investors, have an interest in foreign properties, or want to coordinate many properties into a long-term exchange strategy.

At 1031X, we offer flat-rate 1031 services. A standard 1031 exchange, with one sale and one purchase, costs just $950.  No hidden fees.  No wiring fees.   

Reverse exchanges are one of the more complex exchange methods out there, and that’s why most people are curious about the cost. Reach out to us for a free consultation so we can understand your exchange goals and give you an idea of the cost. 

If you have questions about the rules or procedure, you should speak with one of our experienced 1031 exchange officers. (You may request a free consultation)

The details of your potential exchange help determine which strategy is best for you.

If you’re ready to set up your 1031, you can start here.

Please note that a qualified intermediary cannot provide specific legal or tax advice.

By following two rules.

(1) Make sure your replacement property(ies) have an equal or greater net sales price.

(2) Transfer all of your net equity into the new property(ies) as a down payment.

There is no strict rule here. The IRS cares more about your intent to hold and treat the property for investment. Time is a factor that the IRS may consider when determining if a taxpayer legitimately intended to hold the asset for investment.

After the close on the sale of your relinquished property, you have a maximum of 180 calendar days, or your tax filing date for the year in which the exchange commenced, whichever is earlier, to buy your replacement property(ies).

Remember that you must also correctly identify your potential replacement properties within 45 calendar days from the close of the relinquished property to meet the time limits.

To qualify for a 1031 exchange, you must sell property held “for investment or use in trade or business” and then you must reinvest into another asset with the intent to also hold that for investment or business use.

This can be an ambiguous and even subjective topic. If you have questions, please contact us directly.

We do not hold your exchange funds; rather, we partner with FDIC-insured banks who will open an individual escrow account for you. The account is set up in your name and no 1031 funds may move in or out of the escrow account without your written and verbal authorization

A qualified intermediary, or 1031 Accommodator, helps coordinate and process 1031 exchanges.

The rules and requirements are set forth by U.S. Treasury Reg. §1.1031(k)-1(g)(4).

The QI helps transfer the relinquished (sale) and replacement (purchase) properties; it also establishes escrow accounts for the securing of 1031 proceeds and exchange funds.

1031x.com, Inc has been a qualified intermediary for more than 25 years!

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We always offer a free consultation at 855.457.1031, by email, or video conference. Click here to tell us how and when we should contact you.

Unfortunately, no. The IRS does not consider your primary residence to be an investment asset for 1031 purposes.

Vacation homes do not qualify for 1031 treatment.

You are able to exchange a property at which you spend personal time, but the personal time may not exceed 10% of the total days the asset was rented out, or 14 days, whichever is less.

You can 1031 exchange any property held for investment or business purposes. All properties that fall into these categories are considered “like-kind” in an exchange.

After the close on your relinquished property, you have 45 calendar days to identify potential replacement assets. Within than identification period, you must submit a written document to your 1031 qualified intermediary with a list of potential purchase addresses.

We will provide an electronic form that you can use an update at any time before the end of your identification window.

“Boot” refers to the receipt of taxable assets in violation of IRS rules.

If you directly receive and take possession of any proceeds of your sale, those proceeds become taxable and may no longer be deferred in the exchange (“cash boot”). If you use all of your proceeds but fail to trade equal or greater in net sales price, the difference in net sales price becomes taxable (sometimes called “mortgage boot”).

It simply means that a property is used productively in a business or is otherwise held for investment.

The IRS is fairly liberal with its definition of like-kind real estate. Single-family and multi-family are like-kind. Commercial and residential can be like-kind. The definition even covers unimproved land and mineral rights. If you have questions about a specific property you want to buy or sell in a 1031 exchange, click here to contact a 1031 exchange officer.

Yes!

You can buy or sell partial properties, single properties, or multiple properties in the same exchange.

Keep in mind that all activity in a single exchange must still comply with the 45-day and 180-day rules — as well as identification rules — no matter how many assets are involved.

It depends.

Some selling expenses and closing costs may be paid for with 1031 exchange proceeds; other costs must be paid for with after-tax funds. Examples of items that your proceeds may pay for include title insurance premiums, escrow fees, referral fees, qualified intermediary fees, recording fees, and broker commissions.

You may never use 1031 proceeds to pay for lender fees, prorated taxes or rents, security deposits, or repairs/maintenance. Any proceeds used for these purposes will become taxable.

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.