Most critical time- first 45 days 1-replacement properties must be identified 2-election to use 1031 paperwork must be signed before checks are disbursed
<45 days>
<Day 1 thru Day 180>
Next critical point- closing of an indentified propert(y)(ies) within 180 days.
Disaster control... there are other methods to stretch this timeline past the 180 days mark- consult with a PRP agent for more information.
Cooperation Clause language inserted into your contract is helpful but not required:
"In the event Seller so elects, Buyer agrees to cooperate with Seller in effecting a tax deferred exchange under Internal Revenue Code Section 1031 as amended. Seller shall have the right to elect this tax deferred exchange at any time prior to the closing date and to assign this contract in connection with such tax deferred exchange."
A contract can be amended at closing, provided the buyer does not object, this would be a reason to go into a contract to purchase with the Buyer cooperating from the start. Once the 45 day identification period starts-you don't get a 2nd chance! A mistake is costly. With the Buyer understanding your situation you can have more"wiggle" room if it's necessary. Once a closing happens-a 1031 exchange that was not signed prior to the check disbursement will not get favorable treatment.
Purchasing Your Replacement Property
Cooperation Clause language for your purchase contract insertion would be in your benefit on the purchasing side as well:
"In the event the Buyer so elects, Seller agrees to cooperate with Buyer in effecting a tax deferred exchange under Internal Revenue Code Section 1031 as amended. Buyer shall have the right to elect this tax deferred exchange at any time prior to the closing date and to assign this contract in connection with such tax deferred exchange."
The contract can be amended at a closing, provided the Seller does not object. Early planning to shelter your tax burden is essential. These type of tax benefits awarded by the IRS must be done properly to be used.
Please fill in the questionaire and be prepared to go over the situation particulars for us to help you properly in your transaction. We make referrals to qualified intermediaries that have proven track records. Professional Realty Partners, Inc., agents act as real estate agents in the transaction but are qualified to answer your questions regarding 1031 exchanges and their benefits to the investor.