1031 Exchange Guidelines - Atlas 1031 Exchange Qualified Intermediary in Destin, Dallas, Houston, Texas.

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Internal Revenue Code Section 1031 tax deferred exchanges adhere to specific requirements created by the United State Treasury Department and enforced by the Internal Revenue Service. Each like kind exchange whether forward, reverse, simultaneous, build to suit, or leasehold improvement share general requirements.

Same Taxpayer: The tax return and name appearing on the title of the property that sells must be the tax return and titleholder that buys. A single member limited liability company (smllc) is considered a pass through to the member, consequently, the smllc may sell and the member may purchase in their individual name.

Identification: Post closing on the first property, the Exchangor has forty five calendar days to identify to either the accommodator or closing entity the addresses of the potential replacement properties. In a reverse exchange where either the replacement or relinquished property is parked, the Exchangor has forty five days to submit a final list of properties for sale or purchase.

Three property rule – can identify any three properties regardless of value.
Two hundred percent rule – can identify four or more properties as long as the value does not exceed two hundred percent of the property sold.
95% exception rule – if the value exceeds 200%, then 95% of what is identified must be purchased.

Replacement: Within 180 calendar days following the closing of the first property or extension of the Exchangor’s tax return, the property must be purchased.

Trading Up: The net market value and equity of the property sold must be equal to or greater in the replacement property to defer 100% of the tax. Or pay tax on the difference. Debt and equity in the replacement property must be equal to or greater than the debt and equity in the relinquished property. Additional equity in the replacement property offsets debt. Additional debt does not offset equity.

Hold Time: Though there is no hold time in the 1031 code, the Internal Revenue Service looks to determine whether the property was acquired immediately before the exchange. Was it purchased to fix and flip or held for productive use or investment. Time is one factor of many that supports the intent to hold for investment. The shorter the time, the more substantial the facts should be to support the intent. Additional supportive facts are whether the property is itemized on Schedule E or Schedule A. Investment properties are listed on Schedule E. Was the property rented? Does the level of personal use exceed fourteen overnights per year? If so, the character may resemble a second home.

Andrew W. Gustafson, CES®
Managing Member
Atlas 1031 Exchange, LLC
Toll Free: 866.521.1031 | EFax: 850.201.6911
Dallas: 214.523.9067 | Destin: 850.837.1031 | Houston: 713.821.1776
Email: andgus@atlas1031.com

Atlas 1031 Exchange, LLC is a Qualified Intermediary and does not provide advice regarding specific tax consequences of IRC 1031 tax deferred exchanges. Investors are encouraged to seek the counsel of their attorney and accountant.