FAQ

A: The cost of a Delayed or Personal Property Exchange is a standard fee of $300 per property. For example, if one relinquished property is being exchanged for two replacement properties, the fee would be $900.

The reverse exchange fee is $4800 and up, depending on the complexity of each transaction.

A: Contact an AFC Specialist now to find out what specific type of exchange would best suit your particular investment objective. (818) 225-1642 by Telephone or by email, info@accommodator.net

A: Your decision to do a 1031 exchange must come before the sale of the relinquished property. The proper exchange agreement forms must be completed and given to all subject parties before ownership of the relinquished property is transferred.

A: All proceeds from the sold property in an exchange must be held by a Qualified Intermediary, like AFC, unless the settlement agent has a "qualified escrow account" that is not controlled by you, the investor. If the investor has any control over the proceeds, there will be tax consequences in accordance with §1031

A: The IRS allows for a 45 day time interval for identifying the replacement property. From the day of the sale of the relinquished property, the investor has 45 days to identify up to three replacement properties( Note: There are exceptions granted by the IRS regarding the number of properties which can be identified).

A: A replacement property refers to the property which is exchanged for the relinquished property. All proceeds from the sold property must be transferred to the purchase of the replacement property, which must be of equal or greater value than the relinquished property.

A: IRS regulations stipulate that there is a 180 day exchange period starting from the date of the relinquished property sale. The investor has until the end of the 180 day period or until the date the investor's tax return is due (whichever occurs first) to purchase a replacement property (Note: The exchange is considered complete when ownership of the property is transferred from seller to buyer). The investor may file for an extension with the IRS if the tax return date occurs before the 180 th day.

A: Extensions may be filed with the IRS but the deadlines are almost never extended by the IRS. The IRS have been known to be very stringent with the 1031 Exchange deadlines

A: Unfortunately, the IRS does not give any extensions even if the 180 th or 45 th day falls on weekends or holidays. The time interval includes all calendar days .

A: Two properties are considered of “ like-kind ” nature if they are of similar character. In other words, all real property can be exchanged with other real property. For example, a rental condo may be exchanged with a farm and an office building may be exchanged for a piece of vacant land. Additionally, all personal property can be exchanged for other personal property(Note: there are some limitations with the exchange of personal property, for example, the IRS do not classify livestock of opposite sex as like-kind property in a 1031 exchange). As long as the property, real or personal, is used for income or investment purposes, it can be exchanged.

A: In order to fully defer all capital gain s taxes through a 1031 Exchange, the following stipulations must be met:

Like-Kind Property The Exchange must consist of a relinquished property and replacement property or properties, which are of like-kind nature

45 day and 180 day Periods All deadlines which the IRC specifies must be met. IRS rarely provides extensions or exceptions regarding the 1031 Exchange Timeline.

The Napkin Rule The value of the replacement property or the sum value of the replacement properties must be of equal or greater value than the value of the relinquished property

All Proceeds Rule All proceeds from the sale of the relinquished property must be used in the purchase of a replacement property to qualify for a full tax deferral.

A: No, It is not required to have a mortgage on the replacement property purchased in an exchange.

A: Yes, in this case, the exchange would be recognized as a reverse exchange. A reverse exchange can get much more complex than a standard delayed exchange due to various legal requirements.

A: No, the IRS does not require that the sale or purchase contracts be modified when carrying out the exchange. However, you may want to inform your realtor of the exchange and include a passage in the contract to inform the buyer or seller (depending on upleg or downleg ) that you are conducting 1031 Exchange.

You may find the following example helpful for writing your own passage in the contract, however, you should consult your AFC Specialist before including your own cooperation clause:

"Buyer{or Seller} is aware that Seller {or Buyer} intends to conduct an IRC 1031 Exchange. Buyer/Seller agrees to cooperate in such an exchange. Buyer/Seller has the right to select this tax deferred exchange at any time prior to closing date."

A: Personal Property may be exchanged under IRC regulations as long as the personal property is of "like-kind" nature and fit under the same general asset class. Certain items may not be exchanged for example, stock notes, certificates of trust or beneficial interests.

A: No, IRC regulations require that the relinquished property not be the investor's primary residence. A vacation home, however, may qualify under certain circumstances, depending on how regularly the home is used. To find out whether your vacation home would qualify for an exchange, consult an AFC Specialist