Defer Taxes By Connecting To TIC 1031 Exchange Advisor

A TIC 1031Exchange Advisor handles the compulsory mechanics of a 1031 exchange for the taxpayer. An exchange must be made by an independent third-party according to the US treasury Regulation 1031. You will also hear a TIC 1031 exchange advisor or DST Investment professionals are also referred to as a "accommodator" or “facilitator.”

It is mandatory to have an exchange agreement and use a Qualified Intermediary so that the IRS does not consider the taxpayer to have taken constructive receipt of the proceeds from a sale/disposition. Upon closing, the proceeds of the sale will go directly to the exchange advisor, rather than the taxpayer. The qualified intermediary will then hold the proceeds until they are required to acquire a replacement property, at which time the facilitator will send the funds directly to the closing agent who deeds the property to the exchanger.

According to US Treasury Guidelines, a TIC 1031 exchange advisor or QI is defined as:

1.      A person under contract with the investor in an Exchange Agreement. The exchange advisor or QI has four specific responsibilities to the taxpayer, specifically to:

• Obtain relinquished properties from the taxpayer.
• Transfer the relinquished property.
• Obtain the replacement property.
• Transfer the replacement property to the taxpayer.

2.      A person who is neither disqualified or the taxpayer entering the exchange.

3.      The Exchange Agreement contract must state that there is a limit to the taxpayer’s rights to receive, donate, borrow, or obtain benefits of money or other property, which is held by the QI in some other method. This is in accordance with US Treasury Regulation.

Points you should find in your DST InvestmentProfessionals

An accommodator is bound by the minimum number of rules and regulations. The facilitator don’t need a license to do the exchange. Hence it is important to choose of QI wisely. Go through the following set of questions before hiring an accommodator.

·         Is fidelity bond (bond between the accommodator and taxpayer) as per occurrence or coverage?

·         Is there any policy limitation for fidelity bond coverage or not?

·         Where do you hold the funds of the client? Do you put it in Qualified Escrow Account or Qualified Intermediary Trust account?

·         What type of investment will you suggest for my funds of 1031 Exchange?

·         What is the sufficiency score of E&O insurance coverage?

·         Do you have prior experience in the field of 1031 Exchange?

·         Have you worked as a QI before? If yes, can you please tell the number of years?

Are you still confused? Don't worry, you can contact with us to get all queries solved in a hassle-free manner. Also, you can find a perfect facilitator for yourself here at 1031 sponsors.

Are You in search of Replacement property ?

1031 exchange allows the investor to get the maximum gain from the 1031 exchange properties. However, the exchange process is quite difficult, and it would be useful for the investor if he takes guidance from expert professionals. We have extensively experienced team in handling a highly profitable exchange of property for our diverse client base.

The properties that are involved in the 1031 exchange are office buildings, storage facilities, industrial properties, single-family homes, multi-family apartments, raw lands, retail shopping centers, and triple net leases.

There are certain pre-requirements for acquiring and identifying potential like-kind property or 1031 replacement properties in your 1031 exchange. Replacement property that you want to purchase for 1031 exchange should be determined to your Accommodator and must be identified within the 45th day of the calendar following the end of your relinquished property sale transition.

Let’s discuss an example to explain this:

If the sale of the property of the investor closes on August 31, then the first day of 45 day calendar identification period would be September 1, and the 45th calendar day would be October 15. For this, an investor must follow at least one of the following identification rules when completing the identification of like-kind replacement properties.

One more requirement for completing a 1031 exchange is that the investor must involve qualified intermediaries. So, if the investor is thinking to achieve the 1031 Exchange by himself, then he should stop bothering because the chances are negligible. We can say this is a miracle after all more experienced and qualified personnel will be handling your exchange.

Qualified Intermediaries are the person who is responsible for the exchange. Without the involvement of Qualified Intermediary, also known as QI, an investor cannot complete1031 exchange. If the investor wants to complete the 1031 Exchange by himself, then it is not possible, as Qualified Intermediary is the heart of the 1031 exchange, and we can't imagine an exchange without them.

The exchange process starts with the sale of the relinquished property. For this purpose, the investors require the help of Qualified Intermediary as he owns the proceeds in an appropriate type of account known as Escrow account because the investors are not permitted to touch the proceeds. As we already know, there is a deadline of 45 days for the identification of the replacement property. These 45 days is known as the identification period. Suppose if the investor does not meet either the deadline and couldn’t complete the exchange within 180 days, then the property exchange will not be listed for 1031 exchange. Since time plays an important role, and the involvement of Qualified Intermediary becomes a more important part of 1031 exchange properties.

Defer Taxes By Section 1031 exchange

1031 is a section code of the IRS which has been around since the 1920s, 1031 exchange is the normally used tax deferral tool in real estate. The deferral treatment of capital gains of a 1031 exchange gives the seller of property the best vehicle for safeguarding and building real estate wealth. The provision of the IRC (Internal Revenue Code) Section 1031 allows property owners to exchange their property for other like-kind property with no acknowledgment of capital gains liability or recover of depreciation at the time of the sale.

Section 1031 Exchange is a six-step process-

1. The first step is to put your Investment Property on sale and, at the same time, apply for 1031 exchange too.
2. The next step is to decide the type for 1031 Exchange and the amount on which the process for relinquishing the property begins.
3. After entering into 1031 Exchange, the investor needs to fill all the details of the chosen Replacement Property within 45 days of filling for 1031 Exchange. Please note, make your choice wisely as once you transfer your Replacement Property, you won’t be able to make any improvements to it again.
4. After this, the property is ready to be bought. The investor has to inform the seller and buy Replacement Property as an important part of the exchange program.
5. After 180 days, 1031 Exchange will consequently close your Replacement Property, and you can keep saving Capital Gains tax. You can pursue a similar process to reclaim tax on your other investment properties.
6. Exchanger will identify the replacement property within 45 days, and then the information is sent to QI (Qualified Intermediary). The deal is closed within 180 days by your selected 1031 method, and the investor will start getting the monetary gains.

1031 Exchange Timeline Calculator in brief:

There is a time period 45 days for the identification of property under 1031 exchange and a total of 180 days to acquire the property.

Day 0

Registration of the property for 1031 Exchange and find a Replacement Property

Day 45

From Day 0 to Day 45, the taxpayer or the investor search for the property and upload the details of their chosen Replacement Property.

Day 180

From 45th day to 180th day, the exchanger is supposed to close the deal, and after that, they are deferred from paying capital gains tax on the property.

Advantages Of Section 1031 Exchange

Along with selling the property, the investor can make a steady income in the form of tax returns from the property.

Under 1031 Exchange, the investor is allowed to buy any Like-Kind Property. It can either be commercial.

The investor can easily exchange their demanding property with a property with an easily manageable property.

1031 exchange enables the investor to make property exchange in a different state as well.

The investor can easily exchange multiple properties for a single property, which is not only advantageous but also manageable.

The investor can save up to 37.5% funds from the property by filing for 1031 Exchange.

What are the 1031 exchange timeline requirements ?

A 1031 exchange, or like-kind exchange, helps real estate investors delay capital gains taxes indefinitely. But these exchanges are more complex than just selling one property and buying another.

Besides the rules, you should know there’s the issue of timing as well. Let’s check out some of the time-related rules of 1031 exchanges, as well as some of the other key principles you should know.

1031 Exchange Timeline Requirements

It is normally measured from the date the relinquished property closes. The exchanger then gets 45 days to nominate or identify potential replacement properties. A total of 180 days are given to the exchanger to acquire the replacement property. Please note the exchange is completed within 180 days.

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