1031 Exchange Agreement Form With Us In Franklin
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FAQ
A frequently asked question connected to the 1031 exchange is, “Can you execute a 1031 exchange between states?” At the federal level, the answer is a definitive “yes.” Internal Revenue Code 26 U.S. Code § 1031 – “Exchange of Real Property Held for Productive Use or Investment” – falls under federal tax legislation.
Section 1031 is part of federal law, so it applies to federal taxes, which are the same no matter what state you're in. You can perform a 1031 exchange between business or investment properties located anywhere in the United States, so long as they meet all other 1031 requirements.
In an IRC §1031 transaction, you can exchange real property for virtually any other real property in the United States, as long as the property is held for productive use in a trade or business or for investment purposes.
Your 1031 exchange must be reported by completing Form 8824 and filing it along with your federal income tax return. If you completed more than one exchange, a different form must be completed for each exchange. For line-by-line instructions on how to complete form, download the instructions here.
While foreign property is not of a like kind with domestic property, foreign properties are considered like-kind with one another. You can perform a 1031 exchange with foreign properties, so long as your relinquished and replacement properties are both located outside the United States.
If during the current tax year you transferred property to another party in a like-kind exchange, you must file Form 8824 with your tax return for that year. Also file Form 8824 for the 2 years following the year of a related party exchange. See Line 7, later, for details. Section 1031 regulations.
Section 1031(f) provides that if a Taxpayer exchanges with a related party then the party who acquired the property in the exchange must hold it for 2 years or the exchange will be disallowed.
Lack of Liquidity- Exchanging properties continually can tie up funds in real estate, making it hard for an investor to access liquid capital if required. While real estate can be a profitable investment, it's not as liquid as some other assets.
A Qualified Intermediary, or QI, is an independent third party to the transaction whose function is to prepare the documents necessary to create the exchange, as well as to act as the independent escrow agent for the exchange funds.
