A 1031 exchange can be intimidating for those who have never done one before. But as long as you understand the process, and have a qualified intermediary by your side to guide you, there is really nothing to be afraid of. If you want to learn more about the tax benefits of a 1031 exchange, or you want to get your exchange started today, contact one of our St. Cloud qualified intermediaries – 612.643.1031.
Before Your Exchange
Prior to starting your 1031 exchange, there are a number of things to consider and actions to take. First of all, you need to make sure that your property actually qualifies for 1031 exchange. Most importantly, it has to have been held for use in your trade or business, and not for personal use. There are also some documents you should have prepared to ensure a smooth transaction. A 1031 intermediary can help you with all of these items, so it’s a good idea to involve a 1031 exchange professional before you even start the process. Remember, once you begin your exchange, you only have 45 days to identify your replacement property, and 180 days total to complete your exchange. A little prep work can go a long way to ensure there are no snares along the way.
Sell Your Relinquished Property
Once you have made the appropriate preparations, it’s time to sell your relinquished property. It’s important to keep the sales proceeds that you receive in a separate, segregated account (rather than your own personal or operating account). Keeping things separated will make it as clear as possible to the IRS that you intend to do a 1031 exchange.
45 Days / 180 Days
After you sell your relinquished property, you then have 45 days to identify in writing your replacement property that you intend to exchange into. You have 180 days in total (including your 45 day identification period) to complete your exchange. Any construction improvements to the new property need to be completed within this time frame.
Close on Your Replacement Property
On or before day 180, you need to close on the sale of your new replacement property, and transfer your net proceeds from your relinquished property into the new replacement property. If you fail to close before day 180, your exchange will fail and you will realize your capital gains. The IRS is very strict about the 180 day deadline so make sure you have everything in order to complete your exchange by day 180.
Get Started with Your St. Cloud 1031 Exchange
Our qualified intermediaries have been facilitating St. Cloud 1031 transactions for decades and are ready to help you get started with your exchange – 612.643.1031.