My Vacation Home: Applicable Rules and 1031 Exchange
Can you sell your investment property in a 1031 exchange for a beach house, or a cabin on a lake? The 1031 exchange requires the replacement property to be held for “investment purposes.”…
1031 Exchange QUALIFIED INTERMEDIARY (QI)
Directrust 1031 Exchange Services is the result of our effort to help real estate investors navigate the intricacies of IRC §1031 and to provide a qualified intermediary to guide them through the process.
Our role in providing a Qualified Intermediary
- QI Tasks
The role of the qualified intermediary begins with an investor selling and buying through a qualified intermediary.
- Your Exchange Funds
Directrust 1031 Exchange Services has the responsibility of accounting for and protecting client funds during the period of the clients exchange
- E&O insurance and Fidelity Bond
Fidelity bonding and E&O insurance coverage
- Regulations and Statutes
Directrust, LLC is in compliance with all applicable state regulatory requirements.
Planning your 1031 exchange
With foresight, a 1031 exchange can be a great way to defer taxes and increase your capital for your next real estate purchase. Following are some planning steps to guide you.
STEP 1
Pre-Sale Planning
Begin looking for a replacement property before putting your soon-to-be-sold property on the market. Put your advisory team in place (real estate agent, lawyer, qualified intermediary (QI).
STEP 2
Hire a Qualified Intermediary
Hire a qualified intermediary (QI) to facilitate your 1031 exchange and ensure the exchange rules are followed.
Step 3
List your property for sale
List your relinquished property for sale and continue (from step 1) looking for a replacement property.
Step 4
Close on your relinquished property
Close on the sale of your relinquished property with your QI receiving the proceeds and depositing them in a special escrow account.
Step 5
Identify the replacement property in 45 days
45 days from the close of the sale of the relinquished property you need to identify one or more replacement properties in writing to your QI.
Step 6
Close on the replacement property in 180 days
You have 180 days from the sale of the relinquished property to close on the sale of your identified replacement property/s.
Blog
What You Should Look for When Choosing a Replacement Property
For many investors this will be the second leg of their property exchange, the first being relinquishing their initial property (if they are doing another type of exchange the order could be different).
Do I Need the Cooperation Clause?
The IRS has issued various private letter rulings over time that has developed interpretation structure for a host of issues surrounding the 1031 exchange.