The 1031 Exchange allows an owner of an “investment” property to sell it and defer any taxes on capital gain through purchase of a “like-kind” property.

The most common type of exchange involves first the sale of the relinquished property followed by purchase of the replacement property.

“Relinquished property” is what is sold, while “Replacement property” is what is purchased.

IRS rules allow for exchange of the following as real estate:

Single family Rental

Duplex

Apartment

Commercial Property

Raw Land

The term “exchange” refers to properties, not the parties. It neither necessary, nor typical, that the buyer of the relinquished property be the seller of the replacement property. The key is the way the property moves through the QI (see below).

There is a “Qualified Intermediary” (QI), typically an attorney or a firm that specializes in facilitating 1031 exchanges. The QI acquires the relinquished property from the buyer, transfers the relinquished property to a new buyer of the old relinquished property, acquires the replacement property and finally assigns it to the buyer. There will be an assignment of the Purchase & Sales Contract of the replacement property to the QI if it was initially executed by the buyer.

Funds: in a 1031 Exchange, the funds never flow through the hands of  the buyer. The proceeds from sale of relinquished property is held by the QI and forwarded directly by the QI to the seller of the replacement property.

Timeframe: purchaser must close within the lesser of 180 days of sale of relinquished property or the tax filing deadline (including extensions) of the year in which the relinquished property was sold.

It is the function of the QI to ensure that the transaction conforms to IRS requirements. Again it is important to seek legal and tax advice from qualified professionals

Bill Powell has 22 years of lending experience in the Tech Valley ,  Greater Capital Region of New York and expertise with conventional, jumbo, fixed- and adjustable-rate mortgage loans.

He can also assist with loans for the purchase of land or with your home equity loan needs.

Bill is a life-long resident of New York , received a Bachelor of economics degree from SUNY Cortland, and lives in Bethlehem with his wife and children.

Bill Powell
AVP / Mortgage Loan Officer

Phone: (518) 439-4426
Toll Free: (800) 358-2651
Cell: (518) 588-6756
E-mail: William.Powell@tdbanknorth.com

http://www.tdbanknorthmortgage.com/bpowell