Although we think of our firm as a great client resource, Directrust℠ and our role as qualified intermediary (QI) disqualifies us from giving tax or legal advice to exchangers. Investors/exchangers/taxpayers should seek tax and legal counsel. Having an attorney or accountant is not mandatory to complete an exchange, but we suggest it.

Although it is not required, it is good practice to modify your contract or purchase and sale agreement to reflect your §1031 exchange transaction. This legalese is called the “exchange cooperation clause addendum”.

In addition to holding the exchange funds in a segregated escrow account, a QI will prepare the §1031 exchange documents that enable your transactions to qualify as an exchange. Without exchange documents your sale will most likely be a taxable event even though you follow the exchange steps. Directrust℠ will request a copy of your relinquished contract or purchase and sale agreement and use the contract information to prepare your exchange documents. To have a valid exchange the QI must assign into your purchase agreement. Your exchange documents must be prepared before you close on the sale of your relinquished (sale) property.

An exchanger only has 45 days from the date of the sale of their first relinquished (sale) property to find a replacement property. Because of the short window, we suggest looking for your replacement property before your sales takes place.  The 45-day identification period does not start until the actual closing of the relinquished (sale) property. You may enter a contract to purchase before you sell, you may "identify" properties that you may like to purchase, but you may not make an official §1031 identification to your QI until you have at least sold your relinquished property/s.