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$750 covers you for one relinquished property and one replacement property.

An additional $200 will be charged for each replacement property purchased afterwards.

There's a $30 wire fee for outgoing wires.

That's it.

1031 Exchange Do’s and Don’ts

DO ADVANCE PLANNING for the 1031 exchange. Speak in depth with your accountant, attorney, broker, lender and Qualified Intermediary. Only a CPA/Tax Attorney familiar with 1031 AND your prior several years tax returns can be aware of everything you must consider.

DO NOT overfinance the replacement property.  The IRS does not consider funds remaining due to excess financing to be loan funds.  You may not receive them without disadvantageous tax consequences.

DO REMEMBER that any credit to you on a closing statement is taxable, and reduces the amount of exchange funds that will be used to purchase the replacement property.

DO NOT miss your identification and exchange deadlines. Failure to identify within the 45 day identification period or failure to acquire replacement property within the 180 day exchange period will disqualify the entire exchange. Reputable Intermediaries will not act on back-dated or late identifications.

DO keep in mind these three basic rules to qualify for complete tax deferral:

  • Use all proceeds from the relinquished property for purchasing the replacement property.

  • Make sure the debt on the replacement property is equal to or greater than the debt on the relinquished property. (Exception: A reduction in debt can be offset with additional cash, however, a reduction in equity cannot be offset by increasing debt.

  • Receive only like-kind replacement property.

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DO NOT plan to sell and invest the proceeds in property you already own. Funds applied toward property already owned purchase goods and services , not like-kind property.

DO attempt to sell before you purchase. Occasionally Exchangers find the ideal replacement property before a buyer is found for the relinquished property. If this situation occurs, a reverse exchange (buying before selling) is the only option available. Exchangers should be aware they are considered a more aggressive exchange variation and they are considerably more costly. The Q.I. must take title to both properties and therefore is more exposed to liability. There is a double straight up swap escrow that must take place and the fee is usually calculated by adding both sales prices, and finding a closer experienced in that type of escrow may be a challenge. Additionally, there will be supplemental property tax bills, filing fees, state entity fees, dissolution fees, none of which occur in a delayed exchange.

DO NOT dissolve partnerships or change the manner of holding title during the exchange. A change in the Exchanger's legal relationship with the property may jeopardize the exchange.

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