Plan Ahead for Success

Assess net operating losses or passive activity losses before starting exchange Define clear financial objectives: income, growth, estate planning, or combination Evaluate liquidity needs since all proceeds must be reinvested completely Develop strategy for identifying like-kind properties within required timeframes

Critical Exchange Deadlines

45-day deadline to identify at least one replacement property after sale 180-day deadline to close on replacement property from original closing date Three identification rules: three properties, 200% value rule, or 95% rule Calendar days only with no exceptions for weekends or holidays

Work With Qualified Intermediary

Independent agent holds proceeds and facilitates compliant exchange process throughout Prevents disqualification from constructive receipt of sale proceeds by investor Choose experienced intermediary with clear fees and secure escrow accounts Verify good standing membership in national organizations like Federation of Exchange Accommodators

Reinvest All Proceeds Completely

Replacement property value must equal or exceed relinquished property proceeds Any excess cash returned becomes taxable boot income in current year Add cash or mortgage debt if replacement property costs more Full reinvestment required to maximize all available tax deferral benefits

Like-Kind Property Requirements

Only real estate qualifies since Tax Cuts and Jobs Act of 2017 Properties must be used for business, trade, or investment purposes Includes commercial property, farmland, rental property, and Delaware Statutory Trusts Personal use properties and personal property items no longer qualify

Plan exchange strategy early with clear objectives and qualified tax professional Establish qualified intermediary agreement before selling any investment property Meet strict 45-day identification and 180-day closing deadlines without exceptions Reinvest all proceeds into like-kind business or investment real estate

Top 5 Tips for a Successful 1031 Exchange

Curated by: Rubric Advisors

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What Is 1031 Exchange?

Allows investors to sell investment real estate and defer capital gains taxes
Must reinvest proceeds into another like-kind property to qualify for benefits
First introduced to U.S. tax code in 1921 for investment properties
Defers capital gains, depreciation recapture, and other applicable transaction taxes

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What Is 1031 Exchange?

Plan Ahead for Success

Critical Exchange Deadlines

Work With Qualified Intermediary

Reinvest All Proceeds Completely

Like-Kind Property Requirements

Key Takeaways

Related Topics

Installment Sales (Section 453)

Selling Rental Property: Tax Playbook

Alternative Minimum Tax (AMT) Planning

What Is 1031 Exchange?

Plan Ahead for Success

Critical Exchange Deadlines

Work With Qualified Intermediary

Reinvest All Proceeds Completely

Like-Kind Property Requirements

Key Takeaways

Related Topics

Installment Sales (Section 453)

Selling Rental Property: Tax Playbook

Alternative Minimum Tax (AMT) Planning