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Exchange Requirements

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Exchange Requirement

There are four distinct requirements applicable to all 1031 exchanges :

  • In order to qualify as an exchange, 100% of the monies earned through the sale of any commercial property must be reinvested in the replacement commercial property.

  • Also, the amount of equity held in any like kind commercial property for reinvestment must be greater than or equal to that of the relinquished commercial property.

  • Third Exchange Requirement: The property investor must not have constructive receipt of the sale proceeds at any time during this exchange period or the money becomes taxable income. Typically, this is accomplished by using a professional exchange facilitator as a middleman to hold the sale proceeds and execute the exchange documents.

  • Fourth Exchange Requirement: Both relinquished and replacement commercial property must be like-kind. As used in IRC 1031(a), the words Like-Kind have reference to the nature or character of the commercial property and not to its grade or quality. One kind of class of commercial property may not, under that section, be exchanged for commercial property of a different kind or class.

    Contact us today to be put in touch with a qualified 1031 broker for your next exchange.




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