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Build Wealth and Defer Taxes with a 1031 Exchange
What is a 1031 Exchange?
A 1031 exchange allows investors and business owners to sell real estate assets and capture their gains without paying taxes on the sale. If you sell a property using a 1031 exchange, you get to keep all of the property’s equity for re-investment. This means improving your cash flow, upgrading to more and better assets, or gaining exposure in a better market – without handing the government 30-40%.
What type of property can I exchange?
Any real property held for investment or for productive use in a trade or business. The IRS uses the term “real property” as distinguished from “personal property”, such as a car or airplane, or business inventory. Once you sell, you must trade your equity into another real investment or business property to qualify for 1031 treatment.
Keep in mind that “real property” is a broad category. Commercial buildings, residential buildings, raw land, and even oil or water rights all qualify as real property.
Why do I need a 1031 company to help I defer my taxes?
The IRS does not allow investors to complete a 1031 exchange on their own. This means investors may not sell a property, receive their cash, purchase a replacement asset, and then call it a 1031 exchange. The regulations require that you use a Qualified Intermediary, such as 1031x.com, to properly structure your sale and purchase closings.
Most importantly, you must use a Qualified Intermediary to create an escrow account and safeguard the proceeds from your property sale. Investors attempting an exchange may not have actual or constructive receipt of their sale proceeds; any funds received immediately become taxable!
While the exchange process can seem simple, the IRS rules are fraught with potential traps and odd limitations. That’s why we assign an Exchange Coordinator to each of our clients. Your Coordinator is responsible for answering your questions, preparing your exchange documents, and ensuring that the entire process is transparent and convenient.
1031x Services & Timeline
Safe & Transparent Process
1st Step: Tell us about your upcoming transaction
- Address of relinquished property
- Closing date
- Contact information for each seller on the title (phone and email)
- Name and contact information for a title company, broker, or attorney handling your closing
2nd Step: We assign an Exchange Coordinator to guide you
Your Exchange Coordinator does the heavy lifting for you. Here is what you can expect from us:
- Exchange Coordinator ensures the closer properly sets up your exchange. We will reach out to the title company (and/or lead point of contact) and coach them through the process.
- We share with you our 1031x Exchange and Escrow agreements.
- After closing, the title company will wire sale proceeds to your 1031 escrow account.
- We share with you an editable online form where you can identify replacement assets.
- Once an offer is accepted on replacement property, tell your Coordinator about who will handle the closing.
- Your Exchange Coordinator coaches the replacement title company.
- We release your escrowed proceeds to the closing table ONLY after receiving your signed authorization.
- Replacement property closes. We maintain a log of your 1031 exchange closing documents.
Your 1031 sale will trigger two countdowns:
- 45-day clock to identify up to three potential replacement assets, and
- 180-day clock to close and finish your 1031 exchange
These deadlines are fixed by the IRS. It is virtually impossible to move or change them.
Safeguarding your 1031 exchange funds
Integrity. Experience. Transparency.
We secure your 1031 exchange funds in a safe, liquid, non-commingled Qualified Trust Account. We open a new account for each individual exchange and client. As the exchange progresses, our process will remain completely transparent to you.
The Qualified Trust Account imposes strict limits on how your funds can be withdrawn. All disbursements require your signed authorization and dual confirmation internally. Furthermore, under our guidance, our partner banks implemented new anti-fraud systems and control procedures to help repel cyber-attacks.
Lastly, we maintain records of all transactions for each individual Qualified Trust Account for a minimum of 10 years.