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GITDEC | Mechanics of a 1031 exchange |
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Q and A: FAQ's Glossary 1031 Exchange Basics: How and Why 1031: 1031 Documents: Samples: Corporate Information: Ask us about 1031 Company Information Webmaster |
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It is important that any exchange be carefully planned with the help of an experienced, competent and creative intermediary. Preferably one who is completely familiar with the tax code in general, not just Section 1031, and who has extensive experience in doing many different kinds of exchanges. Thorough planning can help avoid the pitfalls which can be associated with any exchange, and can ensure that the exchangor will accomplish the goals which the transaction is intended to facilitate. Once the planning is complete, the exchange structure and timing are decided, and the relinquished property is sold and closed, the intermediary becomes the repository for the proceeds of the sale. The money is kept in the intermediary's account until the replacement property is located and instructions are received to fund the replacement property purchase. The funds are then wired or sent to a title or escrow company, or closing attorney, in the most appropriate and expeditious manner possible. Then the property is purchased for the exchangor and deeded directly to him. Within this escrow, all the necessary documentation to clearly identify the transaction as an exchange is provided by the intermediary, such as exchange agreement, assignment agreement and supplemental escrow instructions. |
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