It’s relatively easy to start a 1031 exchange. However, once you get things rolling, there are a lot of potential pitfalls for the unwary. We’ll walk through the general timeline of an exchange and offer some tips on this page. Contact our Boston 1031 intermediaries today for help starting your 1031 exchange – 877.373.1031.
First Steps in a 1031 Exchange
Here is a general outline of the 1031 exchange process, from start to finish:
- Sell Your Relinquished Property. Your 1031 exchange technically starts when you sell your relinquished property.
- Identification Period. Once you sell your relinquished property, you then have 45 days to identify your new replacement property. This time is known as the identification period.
- 1031 Exchange Period. You have 180 days total to complete your exchange (including the 45 day identification period).
- Close on Your Replacement Property. Sometime before midnight on the 180th day of your 1031 exchange period, you need to close on the sale of your new replacement property.
Depending on the specific circumstances of your exchange, this timeline may be different. For example, in a reverse 1031 exchange, you close on your new property first, and sell your relinquished property after the fact.
If you’ve done everything correctly, your sales proceeds from the relinquished property will be allocated to the new replacement property, and you will defer your capital gains taxes. But there are a lot of potential slip ups that can occur during the process – perhaps your replacement property isn’t ready in time to close within 180 days, or you accidentally accept some cash boot during the exchange. Hiring a 1031 qualified intermediary can help avoid these costly mistakes.
Start Your Boston 1031 Exchange
Whether you’re exchanging real estate or personal property, it’s always a good idea to involve a qualified intermediary early in the process. A skilled 1031 intermediary can help you set up your exchange correctly and avoid any potential pitfalls. They can also prepare your documents and answer any questions along the way. Our 1031 exchange professionals have been helping investors in the Boston area facilitate like-kind exchanges for years. If you live in the Boston area and are considering the tax-saving benefits of a 1031 exchange, contact our qualified intermediaries today – 877.373.1031.