Locate 1031 Exchange Commercial Properties Anywhere in the United States

Are you planning to trade your investment property? We would recommend a 1031 exchange instead. Considering the benefits you would get on doing a 1031 exchange, trading down your investment property may not be the wisest decision. Section 1031 of IRC, popularly known as a 1031 exchange or tax-deferred exchange, allows investors to defer capital gains tax on exchanging an investment property for another like-kind property. Once you close on the sale of your relinquished property, you can easily locate various 1031 Exchange Commercial Properties with the help of a Qualified Intermediary.

Like-Kind Definition -

One of the major requirements of Section 1031 is that the replacement property must be like-kind to the relinquished property. In other words, both relinquished and replacement properties must be similar in nature, though they may not serve the same purpose. For example, using a 1031 exchange, you can exchange any investment property (rental, industrial, multi-family, etc.) for another and defer up to 100% capital gains tax.

1031 Exchange Deadlines -

One thing you must be mindful of while doing a 1031 exchange is the deadlines. The IRS has quite strict rules when it comes to adhering to 1031 exchange deadlines.

45 Days Identification Period - The countdown for your 1031 exchange begins the day you close on the sale of your relinquished property. The day you close on the sale of your relinquished property is Day Zero. A time limit of 45 days is given after that to identify a potential replacement property. This time frame of 45 days is known as the Identification Period. Written identification of the potential replacement property, containing the street address, must reach 1031 Corp. on or before the midnight of the 45th day.

180 Days Exchange Period - Every 1031 investor gets 180 days in total to complete an exchange, which begins the day the relinquished property is sold. You must complete your exchange on or before the midnight of the 180th as no extension will be provided in case you missed this deadline.

Who is a Qualified Intermediary and how they can help in locating 1031 exchange properties?

A Qualified Intermediary (QI) is an individual authorized to handle 1031 exchanges on behalf of investors. As per the rules established by the IRS, a 1031 investor must involve a QI in every exchange. The reason why the participation of Qualified Intermediaries is mandatory in 1031 exchanges is that locating a 1031 exchange commercial properties requires strenuous effort. In most cases, 1031 exchange investors face difficulties in locating replacement properties. As a result, either they fail to complete their exchange within the specified time limit or get disqualified in the middle. Therefore, in order to help investors close their exchange successfully within the specified time limit, the IRS has made the participation of Qualified Intermediaries compulsory in 1031 exchanges.

With the rise in the number of 1031 investors over the years, the demand for qualified intermediaries has also increased significantly. Hundreds of Qualified Intermediaries can be found throughout the United States. However, choosing an experienced Qualified Intermediary requires a bit of research. Or you can consult a 1031 advisor and they can match you with experienced Qualified Intermediaries.

Beatriz E. Russell is an acclaimed financial writer and blogger with over two decades of experience in writing blogs on finance. he has extensively written on various aspects of blogs on finance.