There are a lot of rules and requirements that govern the exchange of like-kind property. In this article, we are going to explain the most important requirements for any successful 1031 exchange.
You Need to Hold Your Property for the Requisite Use
In order to qualify for a 1031 exchange, you need to be of the right mindset when it comes to holding your property. In a nutshell, you need to hold your property for investment or business use. Personal use property is not allowed in a 1031 exchange.
Your Property Needs to be Like-Kind
All of your property involved in the 1031 exchange needs to be of “like-kind” to one another. What does “like-kind” mean? When you’re dealing with real estate, “like-kind” is defined very broadly, in that most real estate is considered like-kind to most other real estate. You can exchange an apartment building for a hotel, or for a piece of farmland.
You Need to Complete Your Exchange Within 180 Days
The IRS has very strict timelines for completing a 1031 exchange. You have a total of 180 days to finish your exchange. That clock starts ticking after the sale of your relinquished property. If you fail to exchange into your replacement property before midnight on the 180th day, your exchange will fail. In addition, you have to identify in writing your replacement property during the first 45 days of that 180 day period.
You Need to Go Up in your Value, Equity, and Debt
You also need to make sure that you are exchanging into a replacement property that has more value, equity, and debt than your relinquished property.
These rules and requirements can be difficult to keep track of, If you have any questions about whether or not you’re abiding by all the necessary 1031 requirements, contact CPEC1031, LLC to discuss your exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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