In order to complete a 1031 tax deferred exchange you must relinquish investment property and replace it with other investment property. Section 1031 of the Internal Revenue Code says the exchange must be "Like Kind". Like Kind refers to the type of property such as multi-unit apartment buildings, duplexes, triplexes, office complexes, raw land, warehouses, factories, hotels, etc. It is not primary residences, second or vacation homes, personal property like stocks, bonds notes or interest in a partnership. With in 45 days of the closing (recording) of the relinquished property the new property must be identified. You must acquire the replacement property within 180 days from the closing (recording) of the original property to be traded. The gain is assessed in the future when property is liquidated for cash. Most individuals replace the property with one that is at least as valuable as the one sold. A qualified Intermediary must be used to facilitate the exchange. The Intermediary agrees to acquire the relinquished property from the exchanger and convey it to the buyer and acquire the replacement property from the seller and convey it to the exchanger. We at United Title Services are qualified to act as your Intermediary to facilitate your 1031 Tax Deferred Exchange. COMMONLY ASKED QUESTIONS ABOUT 1031 EXCHANGES Does all cash need to be used in an exchange? No, the exchanger is permitted to receive some of the equity, however this will be taxed. Contact your accountant for tax advice. Can improvements be made on the replacement property? Yes. Improvement exchanges are an option to exchanger. They do require some advanced planning. When should you contact an intermediary? When you are in the planning stages. This will allow plenty of time for all parties in the transaction to be notified. After I sell a property can I go back and do a 1031 exchange? No. Once the transaction has been closed (recording) it is too late. Do all the parties to the transaction need to cooperate? No. All parties to the transaction must be notified in writing but need not agree to cooperate. Most buyers and sellers are gladly cooperative. Can I deed directly to the buyer of my property? Yes. With the intermediary involved you are able to direct deed from the grantors to the grantee. This eliminates duplicate transfers. Can I use the replacement property for my primary residence? Yes, however you must meet the holding period requirement prior to converting use of the property. This holding period is from one to two years. Are 1031 exchanges complicated? Most exchanges are very smooth and a simple process when working with an intermediary.