5 Facts to Know About a 1031 Exchange
1. Net Selling Price—To avoid the capital gains tax on the sale of your relinquished property, you must spend an amount equal to your net selling price. (NSP = Selling Price less Closing Cost)
2. What Properties Qualifies—All real estate is interchangeable. House=Duplex=Land=Condo=Business Land=30 Year Lease DEED FOR DEED
3. You must use a Qualified Intermediary—The law requires that you use a QI to facilitate your exchange. Your QI does 3 main things-(1)Prepare the Exchange Agreement, Hold Equity after Closing of the relinquished property, and Coordinate Exchange with all Closing Agents.
4. 45 Day Rule—You have 45 days from the date of sale of the relinquished property to identify 3 replacement properties.
5. 180 Day Rule—You must close on one or more of your identified replacement properties within 180 days after sale of your relinquished property.