Many taxpayers who are interested in a like-kind exchange don't know how to get the process rolling. In this article, we outline the first steps you need to take to get your 1031 exchange started.
Consulting Your Qualified Intermediary
Talking to your qualified intermediary, exchanging information, and letting the qualified intermediary know about your situation is the first critical step in any 1031 exchange.
Here are some questions your qualified intermediary might ask during your initial conversation:
- How do you own the relinquished property?
- Is it vested in your own name, in a trust, or a in business entity?
- Do you have a spouse in title with you?
- What's the value of your relinquished property?
- How much debt do you have encumbering the property?
- What do you expect is your net amount of proceeds or walking away money going to be?
- What is your basis? How much do you have into this relinquished property?
- When is your transaction closing? Is the closing eminent or is it a long ways out?
There are so many questions and unique circumstances to discuss with your qualified intermediary at this first initial call that you want to get started early.
Another very important discussion point is what you want to buy for your replacement property. Do you want to have a management free, relatively low-risk investment? Or are you looking to accelerate your depreciation by leveraging up and buying a much more expensive perhaps more management intensive property?
Early discussions with your professional advisers and qualified intermediary are critical to setting the stage for a successful 1031. The first step is to pick up the phone and start the process with your qualified intermediary.
- 1031 Hotline: If you have questions about the first steps in the exchange process, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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