In order to qualify for a 1031 exchange, a taxpayer must have held their old property for investment or business purposes. But how exactly can you take title to your new replacement property? There are a few methods, which we’ll explain in this article.
Basic Requirements
The basic requirement is that the same taxpayer that disposed of the old Relinquished Property should be the party to use their exchange funds to purchase the new Replacement Property and the same taxpayer should take title to the new Replacement Property. That way there is a continuation of investment by the same taxpayer and the “exchange” is completed into the new Replacement Property. If a different taxpayer were to receive title on the new property, then the IRS would not view that as an exchange and would not allow the taxpayer who sold the Relinquished Property to defer their gain because they would not have completed an exchange with their exchange funds.
This is a complex area of law, and it’s important to have a skilled QI on your side to make sure you have all of your bases covered during your 1031 exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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