Earnest Money & Cash Proceeds in a 1031 Exchange

1031 cash proceeds

When a property is sold, is it possible to take any of the 1031 proceeds and use them for an earnest money deposit on the replacement property? Or do all of the 1031 proceeds from the exchange property need to go to the qualified intermediary? These are very good questions that we'll answer in this article.

Earnest Money & Cash Proceeds

Yes, we can use some (or all) of the 1031 funds to make earnest money deposits.  

Yes, some of the cash proceeds may go to the seller (typically at the time of closing), then this money (taxable boot) will trigger the recognition of the gain on the amount of cash received, but not on the funds that go to the qualified intermediary.

  • 1031 Hotline: If you have questions about earnest money and cash proceeds in a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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