1031 Exchange Agreement Form With Us In Queens
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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.
In New York, property types eligible for a 1031 exchange must be like-kind, which generally means both the relinquished and replacement properties should be used for business or investment purposes. Both properties must be within the United States.
A 1031 exchange does not obviate the need for a realtor. Quite to the contrary, in most cases an Exchanger has an even greater need for a realtor due to the time constraints placed on Exchangers.
While an investor can choose which property to sell (exchange) and identify replacement properties, the investor/taxpayer may not control or have access to the funds in between those two events. For that reason, the use of a qualified intermediary is necessary.
After completing a 1031 exchange, you must report the transaction to the IRS using Form 8824 to maintain the transaction's tax-deferred status. You must file the form with your annual income tax return for the year in which the exchange was completed.
A 1031 Exchange allows for the deferral of capital gains tax by replacing property with one of like-kind and equal or greater value. This exchange operates within a strict timeline, requiring identification of potential replacement properties within 45 days and completion of the exchange within 180 days.
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.
Since 1991, IRC § 1031 has required the use of an impartial third party to hold the proceeds from the Relinquished Property sale until the close on the Replacement Property. This third party is known as a qualified intermediary.
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.