1031 EXCHANGES OF REAL PROPERTY

Under Section 1031, all real property (as it is defined by state law) is considered “like-kind” with other real property of the same nature and quality. The property must be held for investment purposes or for productive use in a business. The following are examples of qualified “like-kind” real property exchanges:

•  Raw land for rental property
•  Single family rental for multi-family rental
•  Retail space for motel/hotel
•  Farms/ranch for golf course
•  30-year leasehold interest for fee simple interest
•  Non-income producing raw land for income-producing rental property

The use of a qualified intermediary is the most common method used to complete a valid tax-deferred exchange quickly and easily. As a qualified intermediary (QI), Wachovia Exchange Services (WES) typically holds funds during the course of deferred exchanges.

The following steps are typically taken when facilitating a forward 1031 exchange with WES as the QI:

1. The taxpayer signs a contract to sell the relinquished property to the buyer.
2. Prior to the property closing, the taxpayer retains WES to be the qualified intermediary.
3. At the closing of the relinquished property, the exchange funds are wired or a check is sent to WES.
4. If the taxpayer does not acquire all replacement property within the first 45 days after the transfer of property, the taxpayer completes the Identification of Replacement Property exhibit and returns it to WES.
5. The taxpayer has a maximum of 180 days in the exchange period (or until the tax filing deadline, including extensions, for the year of the sale of the relinquished property), to acquire any and all replacement properties.
6. At the closing of the replacement property, WES wires the exchange funds or a check is sent to complete the exchange.

For more information about 1031 exchanges, contact Wachovia Exchange Services at (888) 693-5566.

Related Links

•Wachovia Exchange Services Overview 

Corporate & Institutional Customer Service

Buyer:

The party that acquires the relinquished property from the exchangor (taxpayer).

Exchange Period :

The period during which the taxpayer (exchangor) must acquire replacement property in the exchange. The Exchange Period begins on the date the first relinquished property is transferred and ends on the earlier of the 180th day thereafter or the due date (including extensions) of the exchangor's tax return for the year the relinquished property is transferred.

Relinquished Property:

The property the taxpayer begins with and wishes to dispose of in an exchange.

Replacement Property:

The property the taxpayer intends to acquire in the exchange, and the property the taxpayer ends the exchange with.