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1031 Exchange RequirementsReinvest 100% of proceeds:The value of the investment income real estate being purchased must be equal to or greater than the value of the income real estate being sold.
The equity ( income real estate value minus loan balance) in the new income real estate must also be equal to or greater than the equity in the old income real estate. In other words, the loan amount on the new income real estate must be equal to or greater than the loan amount on the income real estate 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 income real estate 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 income real estate.
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