Why You Can’t Access Your Sales Proceeds in a 1031 Exchange

In any 1031 exchange, it is absolutely essential to keep your hands off of your exchange funds. But why is that? In this article, we are going to discuss why the taxpayer conducting the exchange cannot have access to their exchange funds at any point during the 1031 process.

The Importance of Keeping Funds Separated

In order to defer 100% of your capital gains taxes in a 1031 exchange, you need to redeploy all of your sales proceeds from your relinquished property into your replacement property. If, at any point throughout the 1031 process, you receive any of these proceeds, you will recognize gain and be responsible for paying taxes. To avoid this, you want to keep your paws off of your exchange funds at all times throughout the process.

How to Keep Funds Separated

The best way to keep your funds separated is to work with a qualified intermediary. Your intermediary can keep the money safe for you in a segregated bank account – where the funds will sit until you are ready to redeploy them into your replacement property.

CPEC1031, LLC

If you are considering a 1031 exchange, reach out to a qualified intermediary who can help guide you through the process. At CPEC1031, we have more than two decades of experience working with taxpayers from across the United States on their like-kind exchanges of real property. Contact us today at our downtown Minneapolis office to discuss the details of your real estate exchange and start deferring capital gains taxes!

  •  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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