IRS Requirements For 1031 Exchanges

IRS Requirements For 1031 Exchanges

Requirement 1 QUALIFIED INTERMEDIARY (“QI”) - The IRS requires that ALL exchanges (delayed and simultaneous) use an independent, unrelated “qualified intermediary”, IRS Regulations 1031(k)-1(g)(4) and. 1031(b)-(2).

• A 1031 exchange is a tax break. You can sell a property held for business or investment purposes and swap it for a new one that you purchase for the same purpose, allowing you to defer capital gains tax on the sale.
• Proceeds from the sale must be held in escrow by a third party, then used to buy the new property; you cannot receive them, even temporarily.
• The properties being exchanged must be considered like-kind in the eyes of the IRS for capital gains taxes to be deferred.
• If used correctly, there is no limit on how frequently you can do 1031 exchanges.