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Checklist of §1031 Delayed Exchange Steps

Articles from The Massachusetts Focus

Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Summer 2010, Volume 9, Number 1

Checklist of §1031 Delayed Exchange Steps
by Mike Brady, Esq., Vice President and Eastern Region Manager, Asset Preservation

This checklist is intended to provide a brief overview of the steps involved in an IRC §1031 tax deferred exchange.

Review: Review the entire transaction with tax and/or legal advisors.

Sale Contract: Enter into an “assignable” contract to sell the relinquished property.

Execute contract with the exchanger’s name and/or assigns.

Contact a Qualified Intermediary: Before closing, contact a qualified intermediary to initiate the exchange transaction.

Exchange Set-Up: The qualified intermediary will prepare the exchange documents for the relinquished property sale.

A) The original documents will be forwarded to the closing officer who will coordinate the signatures.

B) Copies of documents are forwarded to the exchanger.

Relinquished Property Closes: The qualified intermediary is assigned into the transaction as the seller and sale closes.

A) Pursuant to the assignment agreement and exchange documents, the qualified intermediary instructs the closing officer to directly deed the relinquished property to the buyer.

B) Exchange proceeds are transferred directly to qualified intermediary via wire transfer.

Identification Period: Both the 45-day identification period and exchange period begin.

Although it is the sole responsibility of the exchanger to meet all identification rules, the qualified intermediary will forward confirmation of the exchange proceeds received, the timelines for the 45-day identification period and 180-day (or the date the tax return is due, whichever is earlier) exchange period, the identification requirements and the identification rules.

Property Identified: Exchanger properly identifies replacement property by midnight of the 45th day.

A) Specific written identification, signed by the taxpayer, is forwarded to the qualified intermediary.

B) Written identification can also be made to a party involved in the exchange transaction who is not a disqualified person. See the Treasury Regulations for more details on the identification requirements.

Purchase Contract: Enter into an “assignable” contract to purchase replacement property.

Execute contract with the exchanger’s name and/or assigns.

Contact the Qualified Intermediary: After signing the replacement property contract, contact the Qualified Intermediary.

Exchange Paperwork Drawn: The Qualified Intermediary will prepare the exchange documents for purchase.

A) The original documents will be forwarded to the closing officer, who will coordinate the signatures.

B) Copies of documents are forwarded to the exchanger.

Replacement Property Closes: The Qualified Intermediary is assigned into the transaction and purchase closes.

A) Pursuant to the assignment agreement and exchange documents, the qualified intermediary instructs the closing officer to directly deed the replacement property from the seller.

B) The Qualified Intermediary wires transfers exchange proceeds to the closing officer.

Completion: If all exchange funds are used to acquire the replacement property or properties and all the exchange requirements are met, the exchange is complete.

Provided by Stewart’s 1031 Exchange Subsidiary, Asset Preservation.

For more information, contact:

Mike Brady, Esq.
Vice President and Eastern Region Manager, Asset Preservation
866-394-1031, #504
mbrady@apiexchange.com
www.apiexchange.com