There are very strict rules about what you can and cannot do with 1031 exchange funds after starting the process and many people have specific questions about these funds. In this article, we are going to discuss whether or not you can be reimbursed from the 1031 exchange funds after they have been transferred to the qualified intermediary.
Funds Held By the Qualified Intermediary
The short answer to the question at hand is no. In a 1031 exchange, the first dollars off the table are the profit dollars, not the seed-money or cost basis.
Once a qualified intermediary is holding the money, the exchangor cannot get any money from the qualified intermediary during the exchange period.
On the subject of the return of unused 1031 exchange funds, the rationale for your not recognizing gain is the premise that you are not in actual or constructive receipt of your sale proceeds during the exchange period. The funds are always immediately available for the purchase of like-kind real property:
If you do not identify (or revoke any prior identifications), then the exchange period ends at midnight of the 45th day, and can return the unused exchange funds.
If you do identify and the 45th day elapses, then the 1031 funds are immediately available for the purchase of the designated properties, but if not used for replacement property purchases cannon be returned until the end of the exchange period which end at midnight of the 180th day.
It’s important to be aware of these restrictions before starting your 1031 exchange so you don’t do something that may put your like-kind exchange in jeopardy.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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