There are many steps to a 1031 exchange, but the process can be boiled down to 6 important milestones. In this article, we are going to walk through the necessary steps to complete a successful 1031 exchange of real estate.
Step 1 – What is Your Gain?
First of all, you need to determine whether or not it makes fiscal sense to do a 1031 exchange vs. and outright sale of your property. This involves calculating your potential capital gains taxes and how much you would save if you did a 1031 exchange.
Step 2 – Does Your Property Qualify?
Before you begin the process you also need to determine whether or not your property qualifies for 1031 treatment. In order to qualify, your property has to be held for investment or business purposes, not for personal use.
Step 3 – Contact a Qualified Intermediary
Once you’ve decided to do an exchange, you need to sign the purchase agreement for your relinquished property. If you haven’t already at this point, it’s time to contact a qualified intermediary so they can insert a cooperation clause into your purchase agreement.
Step 4 – Close on Your Relinquished Property
Next it’s time to close on your relinquished property. Be sure you have all of your required closing documents prepared. Your 1031 intermediary can prepare all of these for you.
Step 5 – Replacement Property Identification
Once you’ve sold your relinquished property, you have 45 days to identify in writing your replacement property.
Step 6 – Close on Your Replacement Property
Finally, you need to close on your replacement property within the 180 day exchange period.
CPEC1031 in Minneapolis, MN
The 1031 intermediaries at CPEC1031, LLC have more than two decades of experience working on 1031 exchanges of all shapes and sizes. Using our extensive experience, we can make sure your exchange goes off without any issues. We can also handle all the necessary document preparation and advise you on which replacement properties to identify. Contact our intermediaries today at our downtown Minneapolis office to learn more about our range of services and to get your 1031 exchange off the ground.
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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