Forward 1031 Exchange

A forward 1031 exchange is when the old or relinquished property is sold and closed before the replacement or new property is purchased and closed. For example, a taxpayer enters into a contract or agreement to sell real property held for use in business or investment. The property closes paying off associated debt and the remaining net proceeds are wired to escrow under your tax identification number. Once the replacement property is in contract for an equal or greater amount, a second closing is scheduled, net proceeds are wired and the forward 1031 exchange is completed. 

What a Forward 1031 Exchange Does

Defers the federal and state capital gain and recaptured depreciation tax triggered when the old property is sold and replaced with a property of equal or greater value. The indefinite, interest free loan is used towards buying the new property.

7 Steps to a Forward 1031 Exchange

1. Exchangor engages Atlas 1031 Exchange to accommodate the 1031 exchange by signing an engagement letter and completing a W-9.  The W-9 is required by the bank to open an escrow account on behalf of the Exchangor.

2. Sale of old or relinquished property is negotiated and a Real Estate Sales contract is signed. Remember to include 1031 assignment language in the contract. Is this required, no, but it is suggested to alert all parties to the sale of the intent to initiate a 1031 exchange.

3. At the first of two closings, the Exchangor signs the traditional closing documents and 1031 exchange documents. The Buyer will also sign a Notice of Assignment. The IRS requires that all parties to the exchange are notified in writing.

4. Net 1031 exchange proceeds are wired to a custodial banking partner for deposit into a non commingled escrow account under the individual's social security number or company's employed identification number. If the Exchangor is not a US citizen, then the funds are wired to an account under their international tax identification number or employer identification number if relinquished property is titled to a foreign corporation.

5. Identification and replacement period begins the day following the closing. Exchangor must identify the potential replacement properties by the 45th calendar day or the 1031 exchange ends on the 46th calendar day and the 1031 exchange funds are returned to the Exchangor with interest earned. Replacement property must be purchased within 180 calendar days from closing.

6. Real Estate Purchase Agreement is signed by Exchangor for the replacement property. Remember to include the replacement 1031 assignment language in the contract. The replacement property must be identified on the 45 identification form.

7. Closing is scheduled where traditional closing documents are signed along with 1031 exchange documents. 1031 exchange proceeds are wired prior to closing.

After listening and understanding your real property exchange, the Certified Exchange Specialist at Atlas 1031 will create exchange documents in accordance with the 1031 Internal Revenue Code and provide steps to defer your capital gain and recaptured depreciation taxes. 

What You Get

  • Certified Exchange Specialist® consults with you to discuss your forward 1031 exchange.
  • Engagement letter itemizing Qualified Intermediary fee, interest rate and exchange steps.
  • Safe, secure non commingled, interest bearing escrow or qualified escrow account.
  • Letters identifying 45th and 180th calendar days including property identification instructions.
  • Follow ups prior to 45th and 180th calendar day thresh holds.
  • Monthly escrow account statements.
  • At exchange completion, a summary file of primary 1031 exchange documents for you and your accountant.
To learn more, Contact Us at and 850.496.0090.  

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