If you call a qualified intermediary on short notice and ask them to prepare a set of 1031 exchange documents, they're going to jump through a lot of hoops – collecting information, reading the purchase agreement and title report, interfacing with the escrow and title company, and generating some very technical 1031 documents that are specifically tailored to your transaction.
Cancelling a 1031 Exchange at the Last Minute
What if the seller decides to not do a 1031 exchange after having this fire drill to prepare their 1031 documents? That's fine - you don't have to do a 1031 exchange. It's a free country. But you probably have a moral and perhaps legal obligation to compensate the qualified intermediary for stopping everything and working exclusively on your transaction to get the 1031 prepared.
It's common if the intermediary has prepared, circulated, and sent out your 1031 documents for the intermediary to charge a cancellation fee if, before the closing of the relinquished property, the taxpayer decides not to proceed with the 1031 exchange.
- 1031 Hotline: If you have questions about 1031 exchange cancellation fees, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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