1031 Exchange Agreement Form For Export In Houston
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They will hold your exchange proceeds during the transaction process. Do not take receipt of funds – all proceeds must go to the QI or 1031 is invalidated. You have 45 days to “identify” replacement property, and 180 days to close on the relinquished property.
Typically, a Qualified Intermediary (QI) serves as the custodian of the proceeds until they are reinvested in like-kind property to complete the exchange. But the QI is actually considered to be the person with whom you exchange your property.
The IRS 1031 exchange rules allow Texas real estate investors to defer capital gains tax when they reinvest the proceeds from a property sale into a like-kind property. To utilize this tax strategy in the current tax year, the properties involved must be held for productive use in a trade, business, or investment.
A delayed exchange is the most common type of 1031 exchange. In this scenario, the investor sells their relinquished property and then has a specified period of time to identify and acquire a replacement property.
A qualified intermediary is used to hold the proceeds of the Relinquished Property sale until it is time to transfer those proceeds for the close of the Replacement property.
The foundation of all successful 1031 exchanges is laid by the qualified intermediary. Do your due diligence in researching qualified intermediaries to ensure you are not only getting the best service possible, but to ensure your deferred capital gains tax will hold up above IRS review.
A qualified intermediary (QI) or accommodator is a person or business who enters into a written exchange agreement with a taxpayer to: Acquire and transfer property given up, and. Acquire replacement property and transfer it to the taxpayer.
During a 1031 exchange, a title or escrow company is typically engaged to manage the movement of funds and the essential paperwork. Their involvement is integral to effectively and securely presiding over the transference of ownership from the given-up property to the substituted property.
As such, the process is uniformly recognized across all 50 states and DC.
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.