Frequently Asked Questions - 1031 Exchange
October 10th, 2007 by amirshahkaramiFrequently Asked Questions - 1031 Exchange
Q: How long do I have to own a property before I can exchange it?
A: The longer the better. Unfortunately, there is no safe holding period for property to automatically qualify for an exchange. Keep in mind, the property only needs to be “held for investment or productive use in trade or business” for it to be eligible for an exchange. Time of ownership is only one factor the IRS looks at when determining if the property was “held for investment”. Some tax advisors recommend a minimum holding period of one year.
Q: Can I sell my duplex and purchase raw land?
A: Certainly. Properties involved in an exchange need to be “held for investment or productive use in trade or business”. Holding land for its future appreciation would be considered held for investment. Don’t get confused by the “like-kind” requirement. “Like-kind” can be any real property used for business or investment purposes within the U.S.
Q: Can I move into a rental property that was originally purchased as part of a 1031 Exchange?
A: Yes - but not right away. Keep in mind that the IRS will look at your “intent” in determining if your exchange is valid. If the IRS feels your original intent when the property was initially acquired was to use it as a primary residence, you may have your exchange disqualified. To play it safe, rent the property out for as long as possible before moving in.
Q: Do I have to reinvest ALL of my cash (equity)?
A: No. However, any cash (equity) that is not reinvested in real estate will be taxable (and is known as cash boot). The general rule of thumb if you don’t want to pay any taxes is to reinvest all of your cash and purchase a property equal or greater in value.
Q: How long do I have to complete my exchange?
A: 180 days. However, also keep in mind you will be required to identify your potential replacement properties on day 45 of your exchange. Your timeline starts when you close escrow on the property you are selling.
Q: Does my Realtor need to do anything special since I am exchanging?
A: Your Realtor should make sure the sales contract is assignable. Asset Exchange Company can provide the necessary language for the contract.
Q: How do I get my exchange started?
A: Call Asset Exchange Company at 877-471-1031 as soon as you’ve opened escrow. We’ll draft up an exchange agreement and coordinate with you and your escrow company to facilitate the exchange.
Q: What are their fees?
A: $499 for a standard one for one delayed exchange.
Q: Do you handle Reverse 1031 Exchanges?
A: Yes. Asset Exchange Company can accommodate Reverse 1031 Exchanges. We also handle multi-property exchanges, construction and improvement exchanges and reverse construction/improvement exchanges.
Q: Does your company have an Attorney or a CPA on staff?
A: Both. When you work with Asset Exchange Company, your transaction is handled from start to finish by an attorney and a CPA. You can consult with the attorney/CPA as much as necessary at no additional fee.
Q: What distinguishes Asset Exchange Company?
A: Hard work - and we like what we do. Asset Exchange Company wants to be the resource for all your 1031 Exchange needs. We work hard for our clients, we are responsive and we offer great rates.
Popularity: 30% [?]
