Exchange Details & Requirements

How to Initiate an Exchange

The Exchanger has 45 days from the date the relinquished property closes to “identify” potential replacement properties and to properly notify the Qualified Intermediary (Q.I.) in writing. The purchase of the replacement property must be completed prior to the normal tax return filing date or within a maximum of 180 days, including tax return extensions, after the close of the relinquished property. After the 45 days has passed, the Exchanger may not change his or her Property Identification list and must purchase one of the listed replacement properties or the exchange fails.

Three general rules apply to a 1031 Exchange:

  1. Purchase a replacement property that is of equal or greater value than the relinquished property
  2. Reinvest all of the exchange equity into the replacement property
  3. Obtain the same or greater debt on the replacement property as on the relinquished property. The Exchanger can offset the amount of debt obtained on the replacement property by putting the equivalent amount of additional cash into the exchange.

The Exchanger must exchange property that is considered Like-Kind property.

IRC Section 1031 does not apply to exchanges of stock in trade, inventory, property held for sale, stocks, bonds, notes, evidences of indebtedness, certificates of trust or beneficial interests, or interests in a partnership.

Contact Northland Securities1031 as well as your tax professional, legal advisor and qualified intermediary prior to initiating a 1031 Exchange.

1031 Exchange Requirements