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1031 Exchange RequirementsReinvest 100% of proceeds:The value of the investment investment property being purchased must be equal to or greater than the value of the investment property being sold.
The equity ( investment property value minus loan balance) in the new investment property must also be equal to or greater than the equity in the old investment property. In other words, the loan amount on the new investment property must be equal to or greater than the loan amount on the investment property being sold.
Third 1031 Exchange Requirement: The property owner mustn’t have constructive receipt of the sale proceeds during the exchange period or else all funds become taxable income. Typically, this is accomplished using a professional exchange facilitator to hold sale proceeds and execute the exchange documents.
Fourth 1031 Exchange Requirement: Both relinquished and replacement investment property must be like-kind. As used in IRC 1031(a), the words Like-Kind have reference to the nature or character of the investment property and not to its grade or quality. One kind of class of investment property may not, under that section, be exchanged for investment property of a different kind or class.
Contact us today to be put in touch with a qualified TIC advisor for your next 1031 exchange.
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