Execution of Complex IRC 1031 Exchanges

The 1031 Exchange is quite possibly the most powerful investment tool currently available to property owners. Exchanging gives investors the ability to move from investment to investment while keeping their capital (equity) intact deferring paying both Federal and State capital gains taxes (including depreciation recapture) through a "like-kind" exchange transaction.

Unfortunately, many real estate investors don't make use of this technique for preserving and increasing their wealth. The Carlson Company has considerable expertise in guiding clients through this process. Moreover, we are particularly skilled in executing the more "complex" Reverse Exchange and Multiple Disposition Exchange. See process graphic (Multiple Disposition IRC 1031 Exchange Process & Timeline).

Key 1031 Exchange basics include:

• A qualified intermediary is a must to facilitate the entire process for you.

• Timeframe: From the time of closing on a relinquished property an investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property.

• Set up: The exchange must be set up prior to the closing of the investor's relinquished property. The investor cannot have actual or constructive receipt of the funds.

• Values: In order for an investors exchange to be completely tax deferred, the value and equity of the replacement property should be equivalent to or higher than that of the relinquished property.

• Title: It is very important to review how title is held on an investors relinquished and replacement properties and consider potential financing requirements. The vesting needs to be consistent, in order to maintain the IRS continuity of vesting requirement.