The 1031 exchange process can be long and complex, but we're here to simplify things for you. In this article, we are going to talk about the 1031 exchange process - from preparation to the closing of the relinquished property.
Purchase/Sale Agreement for Relinquished Property
Complete your purchase/sale agreement as to your Relinquished Property (the property you are selling) just as you would with a regular sale. Show the name of the seller as yourself and add “and or assigns.” You should also add a cooperation clause to the purchase agreement, stating that you intend this transfer to be part of a 1031 Tax Deferred Exchange and require the buyer to cooperate. The cooperation clause serves to provide notice to your buyer that you intend to consummate a tax-deferred exchange, as required by the regulations.
Closing Company
Arrange for a title company or an attorney to close your transaction. Make sure you tell the closing agent that this transaction is going to be a 1031 exchange.
Exchange Company
Notify CPEC1031 of your pending sale and closing date. We provide a customer application form to organize all of the information about you as the taxpayer/exchanger, the property you are selling and the approximate date of closing. Fax the customer application form and the purchase/sale agreement to (612) 395-5475.
Closing on the Relinquished Property
CPEC will contact the closing agent and acquire any additional information needed to set up the 1031 Exchange for you. We will prepare the Exchange Documents and send two (2) sets of the documents directly to the closing agent. At closing, you will sign the Exchange Documents along with your other closing documents. The closing agent should give you one set of the documents for you to keep for your tax records and send one set to CPEC, together with a copy of the closing statement and deed transferring title to your Buyer.
Post Closing Activities
Once the closing is complete, the closing agent will wire transfer the proceeds into a separate, segregated and “two signature” FDIC insured exchange escrow account. Upon receipt of these funds and a set of the Exchange Documents, we will send you a letter showing the amount of proceeds we received in the wire, which amount should match the amount shown on the closing statement. This letter will also include the dates of the 45 and 180 day periods and a form to identify your Replacement Property (“timeframe letter”).
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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