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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:

The taxpayer signs a contract to sell the relinquished property to the buyer.
Prior to the property closing, the taxpayer retains WES to be the qualified intermediary.
At the closing of the relinquished property, the exchange funds are wired or a check is sent to WES.
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.
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.
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.

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Wachovia does not provide tax or legal advice, nor can we make any representations or warranties regarding the tax consequences of your exchange transaction. Property owners must consult their tax and/or legal advisors for this information. Our role is limited to serving as qualified intermediary/accommodator to facilitate your exchange. The summaries of steps for qualified exchanges are for illustration purposes only and are not intended to be exhaustive and will vary depending on the complexity of the transactions.

FDIC basic insurance covers $100,000 per depositor per insured bank.

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1031.exchange@wachovia.com

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