In a 1031 exchange, is it possible to identify to someone other than the qualified intermediary? Let’s say you are a syndicator and you have a client who said they were going to buy into one of your DSTs, but forgot to identify, and now they want to close into your DST.
To answer this question, let’s talk about the basic rules for identifying property in a 1031 exchange. First, your identification needs to be in writing. The writing also needs to clearly describe the property. That identification also needs to be signed by the taxpayer.
So yes, you can potentially identify to the seller of the replacement property.
Another prudent reason that we like to see a strong cooperation clause in the replacement property contract is that the purchase agreement itself could constitute an identification. It’s in writing, it’s signed by the purchaser, it clearly identifies the property. If you put a very strong cooperation clause in that agreement then you’ve pretty much got it made.
If an identification is submitted in the body of an email, does the email signature constitute a signature? In 1944, if you were serving in the Army and you wrote a letter back to your friends or family, often people would sign the letters. That was the custom of the time. Nowadays, the custom is to have an email signature block for such communications, so I think it might constitute a signature for identification purposes. All that said, we can’t be 100% sure on this because there hasn’t been a case to litigate this issue.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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