Sellers of investment properties may be able to utilize the tax deferred exchange. Section §1031 of the Internal Revenue Code offers taxpayers one of the last great opportunities to build wealth and save taxes. The Taxpayer (“Exchanger”) can sell investment property, acquire a Replacement Property and defer the tax that would ordinarily be due upon the sale. To fully defer the capital gain or recapture tax, the Exchanger must (a) acquire “like kind” Replacement Property.
An exchange is rarely a swap of properties between two parties. Most exchanges involve multiple parties: the Exchanger, the buyer of the Exchanger’s old (“Relinquished”) property, the seller of the Exchanger’s new (“Replacement”) property, and a Qualified Intermediary. To create the exchange of assets and obtain the benefit of the “Safe Harbor” protections set out in Treasury Regulations 1.1031(k)-1(g)(4) which prevent actual or constructive receipt of exchange funds.
Please consult your tax attorney or accountant for eligibility and the tax benefits in your specific case. Once you have determined to proceed with a 1031 exchange it is a fairly simple but very precise process.
You may select your own “Qualified Intermediary” to accomplish the exchange for you. We have recommended and had excellent success with IPX1031. This company serves the entire Fidelity National Financial (FNF) family of title companies, our title insurer.
Fees to hire a Qualified Intermediary services range from about 1000-1800. Contact Scott Rotkowitz, Esq., Vice President at IPX1031 for exact pricing for your situation and more details. His phone number is 866-588-1031 or email: Scott.Rotkowitz@ipx1031.com
If you will be participating in a 1031 exchange the Qualified Intermediary will need the following information:
- Agreement of sale
- Copy of the driver’s license for individual exchangers and Letter of Good Standing and Operating agreement for legal entity exchangers.
- Title Company contact information; that’s us: Settlement Ink
- Contact information for all parties
- Contact information for attorney and CPA that is advising the exchanger.
- Closing Date