What are the rules and requirements of 1031 exchanges?

There are five key rules and requirements when it comes to 1031 exchanges.

1. Same taxpayer: The individual or LLC selling the existing property must be the same one receiving the new property.

2. 45-day identification period: The seller has 45 days after closing on the older property to identify the “like-kind” properties to exchange. You can find the three rules on property identification here.

3. 180-day exchange period: Within 180 calendar days after the first property’s closing, the new property must be purchased.

4. Trading up: The single replacement property, or the total value of multiple properties purchased, must be greater than the property being relinquished.

5. Sold as an investment: 1031 exchanges are only for investment properties. This is usually demonstrated by holding your property for more than a year. However, exchanges within a shorter time period can be done, but it’s recommended that you document your intent to hold as an investment in order to avoid getting audited.

Go Back to Full List of Real Estate FAQs

Get in Touch Today!


BuyingSellingBoth

X
Get In Touch Today