1031 Delayed Exchange Explained

1031 Delayed Exchange

A 1031 delayed exchange represents a simple, strategic method for selling one qualified property and the subsequent acquisition of another property within a specific time frame for the deferral of capital gain taxes. Any property owner should consider a Delayed Exchange for the sale of their existing property. To do otherwise would necessitate the payment of capital gain taxes in amounts that can exceed 20% to 30%, depending on the appropriate combined federal and state tax rates.

It also provides exchangers with more flexibility and options in acquiring the replacement property than the simultaneous exchange. The delayed exchange begins when the exchanger's first relinquished property is sold and is completed when the last replacement property is acquired within the prescribed exchange period. There are two basic aspects to a Delayed Exchange. First, the purchase price of the Replacement Property must be equal to or greater than the sales price of the Relinquished Property. Secondly, all equity received from the sale of the Relinquished Property must be used to acquire the Replacement Property.

Several Steps in a 1031 Delayed Exchange

  • STEP 1: List your exchange property for sale with a licensed real estate broker.

  • STEP 2: Begin your search for replacement property.

  • STEP 3: Open escrow on the exchange property being sold and complete the exchanged information sheet which was given to you.

  • STEP 4: Provide written notification of the properties you wish to identify, not later than 45 days following close of escrow on the first property sold.

  • STEP 5: Notify immediately as soon as you open escrow on your replacement property.

 Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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