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.

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.