Steps to follow for a successful 1031 exchange

Posted on Mar 13, 2017

So you have decided to sell the space you held for business or investment for a greater sum than the one you have paid when you purchased it. Well, you should know that the money you take would be subject to capital gain tax, and this means that you will not be able to use the money for investing into a more profitable business. But there is a way you can change the property you held for investment with a new one, to not pay any tax. You have the possibility to use a tax-deferred exchange, which allows you to sale your space, and to acquire a new one through an exchange. In this way, you will not have to pay the capital gain you have obtained from the initial sale of the property. This is a powerful money-saving method, if you are using it correctly. If you need assistance during the process, then you should get in touch with one of the 1031 exchange companies California, because they are experts in this domain and they are able to offer you help.


Step 1 – hire professionals to help you

If you want to be sure that you conduct the exchange safely, then you should collaborate with experts in this domain, because they know what the process implies. You might not have a thorough understanding of the 1031 tax-deferred exchanges and in this case, the best option you have is to find a qualified company, to offer you assistance. You should know that tax laws change daily and new regulations appear periodically, so it is highly advisable to get the help of a professional.

Step 2 – Find a replacement property

It is important to find a relinquishing property as soon as possible, because this is the one you will get, in the exchange of the space, you want to move from. You have to get in touch with investors and see if you can find someone who is willing to offer their property for yours, or you should try to find a buyer for your space. If you do not find a person who is willing to exchange their property for yours, and you find a buyer for your space, then you should ask the help of a middleman, because you are not allowed to enter in the possession of the money.

Step – Find a qualified intermediary

The key condition of a 1031 exchange is that you not simply sell and buy properties. The entire process is seen as a transaction. You will have to collaborate with a professional intermediary, because they will be the ones, who will handle the funds for you. The entire time of the transaction, they will be the ones who will hold the funds and will conduct the exchange. You have the possibility to use a law firm or a bank as a qualified intermediary for the exchange. You are not allowed to choose as a middleman one of your family’s members.