Are You Looking for 1031 Exchange Replacement Property Nationwide?
1031 exchange Replacement Property is the new property being acquired by a taxpayer when making a 1031 exchange. To be eligible to be part of a 1031 Exchange, the replacement property (the new property being acquired) can be any real estate that is ‘held for investment purposes or used in the taxpayer’s trade or business’. For example, any real estate that is owned for business (other than a builder’s inventory), investment, or income producing purposes will normally qualify. ReplacementProperty.com can help you understand the important issues you should consider in finding a replacement property, and can help you find the right solution for your needs.
Replacement Property - Basic Rules of a 1031 Exchange
The properties involved in a tax deferred exchange (the relinquished property and the replacement property) must be similar in nature or characteristics or Like-Kind. ‘Like-kind’ real estate refers to the nature or characteristics of the property and not to its grade or quality. The IRS is very clear as to what types of property qualify as a replacement property and which do not.
Property types that would likely qualify as a Replacement property would include:
- A rental home.
- A duplex or other apartment building.
- Raw land.
- An office building.
- A store building.
- A shopping center.
- A replacement location for a business headquarters or small office (regardless of the size of the property).
- Residential relinquished property for commercial replacement property.
- A Bank acquired as a replacement property for raw ground sold.
- raw land acquired as relinquished property in exchange for a condominium held as a rental property.
- Fee simple interest in your relinquished property for 30-year leasehold in your replacement property.
- Single family rental as replacement property for a multi-family rental sold.
- Non-income producing replacement property for income producing relinquished property (and vise versa).
- A rental home acquired as replacement property in the sale of a dental office.
Property that would not likely qualify as eligible replacement property in a 1031 exchange would include property such as:
- Your personal residence. [If you rent a portion of your home or use it as a home office, that portion may qualify for a 1031 exchange.]
- Property purchased or held for resale.
- Land which is under development.
- Property held as Inventory (e.g. a contractor’s spec homes or building lots).
- Spec homes (new construction or remodels) for resale (e.g. property ‘flipping’).
- Beneficial interest in a partnership.
1031 Basics: Selecting a Replacement Property and the Role of a Qualified Intermediary
A Qualified Intermediary is the mechanism required by the IRS that allows the sale of property and the acquisition of a replacement property to qualify for deferral of capital gains taxes. In order for a 1031 Exchange to be considered valid under IRC “safe harbor“ Regulations, there must exist a written agreement between the seller of the relinquished property (who would otherwise need to pay Capital Gains tax) and the intermediary noting the seller’s intent to exchange into a replacement property. The agreement must expressly limiting the taxpayer's rights to control or benefit from the proceeds of the sale of the relinquished property, except that the money is used for the acquisition of the replacement property.
A Qualified Intermediary will assist you in acquiring your replacement property, but does not provide legal counsel, tax advice, or other related services to the Exchangor. Services usually provided by a Qualified Intermediary usually include:
- Coordination with the Exchangor to ensure a successful exchange.
- Preparation and/or co-ordination of the requisite documentation commensurate with acquiring the Replacement Property.
- Escrow assistance.
- Preparation of documentation related to the 1031 Exchange and the acquisition of a replacement property.
- Securing and managing the security of the proceeds from the sale of the relinquished property in an insured bank account while the exchange is in process.
- Disbursement of exchange proceeds at closing.
- Assistance in indentifying Replacement properties and holding the document of Identification of a Replacement Properties that must be sent by the Taxpayer.
- Submission of the exchange details as they pertain to the Exchange and the taxpayer’s records.
"Thank you for your outstanding program. Your team is great and your options are even better! I’ve been impressed with all my new 1031 replacement property solutions."
- S. Hutchins
Selecting a Replacement property can be an enjoyable experience; and ReplacementProperty.com can help you make the most of your experience.
ReplacementProperty.com is a service offering of 1031 Exchange Service Center, a Qualified Intermediary with over 10 years of experience in the Qualified Intermediary business. We have full time accounting and legal professionals on staff with years of experience in the 1031 business. More importantly, we’ve been helping customers identify suitable replacement properties for even longer We’re familiar with the procedure outlined under Internal Revenue Code Section 1031 and can help you take full advantage of the benefits of a 1031 exchange. Our experience allows us to assist you in traditional exchanges, deferred exchanges, reverse exchanges, TIC exchanges, improvement exchanges and more. More importantly, we have the expertise you need to manage the replacement property selection process.
Contact us today to speak with a qualified Exchange Advisor for free. Our service guarantee is a pledge of reliability, expertise, and Simple, Safe, Secure experience.
We’re a Tenant In Common company specializing in 1031 exchanges into TIC replacement properties. We can assist you with every aspect of your TIC replacement property purchase.
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