A 1031 Exchange is the means by which a seller of property held for productive use in a trade or business or for investment may defer payment of taxes on gain by exchanging that property for other “Like Kind” property which is also to be held for use in a trade or business or for investment. When our Company is asked to be a Qualified Intermediary, Mercury Exchange will prepare a “Like Kind Exchange Agreement” . In order to prepare the Agreement, Mercury Exchange will require a contract to buy and sell real estate with reference to a tax deferred exchange for the relinquished property and a copy of the title commitment.
What Fidelity National Title helps us do
* Prepare Like Kind Exchange Agreement
* Coordinates with Title Company handling closing of sale & purchase
* Deposit proceeds into an Interest Bearing Account (funds are not commingled)
* Notify Exchanger of funds being invested
* Notify Exchanger of critical dates 45th and 180th day
* Send reminder letter that 45th day is approaching if no properties have been identified
* Disburse funds to appropriate party for the closing of replacement property(ies)
* Provide letter showing all deposits, withdrawals, and interest earned after the Exchange has closed
Fidelity National Title Co. can provide closing and title insurance services on relinquished and replacement properties in Colorado.
IMPORTANT THINGS TO KNOW
The IRS Rules for Exchanges
You will need to follow these primary rules for your exchange to meet stringent IRS regulations:
** Real Property Use. Both your old and new properties must qualify as investment or business use. If both properties pass this test, you can exchange nearly any type of real estate.
** 45 Day Identification Period. You have 45 DAYS from the closing of your sale to list the properties you may want to purchase. There are NO exceptions to the deadline.
** 180 Day Exchange Period. From the sale closing date, you have 180 days to close on the purchase of one or more of your IDENTIFIED PROPERTIES. There are NO exceptions to this deadline.
** Qualified Intermediary (QI) The IRS mandates that you use a QI to prepare the legal documents for your exchange. Because the QI must be independent, it cannot be your friend, employee, broker or even your accountant or attorney. The QI also holds your money, so that you do not have access to it.
** Proper title holding. You must purchase and take title to your identified property EXACTLY as you held title to your relinquished property.
** Reinvestment Requirement. To defer all of your capital gain tax, you must buy a replacement property equal or higher in value than the one you sold. Also, you must reinvest all of the cash proceeds from your sale.
** Financing. If you are financing a portion of the Replacement Property, the loan amount should not cause you to receive cash back at the time of closing.