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1031 Exchange RequirementsReinvest 100% of proceeds:The value of the investment investment property being purchased must be equal to or greater than the value of the investment property being sold.
The equity ( investment property value minus loan balance) in the new investment property must also be equal to or greater than the equity in the old investment property. In other words, the loan amount on the new investment property must be equal to or greater than the loan amount on the investment property being sold.
Third 1031 Exchange Requirement: exchangers must use a Qualified Intermediary. The Intermediary is the entity that structures, consults, guides and documents the exchange transaction from beginning to end. An Intermediary will hold the funds and provide technical experience to maintain the integrity of the exchange.
Fourth 1031 Exchange Requirement: The investment property exchanged must be of like-kind. Many people misunderstand this provision, thinking it must be a direct swap. But the requirements are a little more generous. It is possible, for example, to exchange a vacant piece of land for an improved piece and still meet the requirements for like-kind investment property.
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