Who Prepares a 1031 Exchange?

Written By Andy Maloney
a stack of clipped papers

Investors often use a 1031 exchange to avoid paying capital gains taxes when selling real estate. Rather, they agree to do a like-kind exchange for another property of equal or greater value.

No taxes on the proceeds sounds pretty good, right? Except — it’s not so easy. There are many intricacies involved in these transactions so it is no surprise that only certain parties are qualified to handle them. 

Who prepares a 1031 exchange? Let’s talk about it.

An Overview of a 1031 Exchange

There is a lot involved in a 1031 exchange. Below is a very brief overview of the process. 

  • Determine which property you want to sell and find the property you want to exchange it for. Remember, the property you are buying needs to be similar and equal or better quality than the property you are selling.

  • You have 45 days to identify the new property from the date of the sale.  

  • Choose the right person to prepare your 1031 exchange.

  • File Form 8824 with the IRS to report the transaction. You will include all information about the properties and the timeline, submitting the completed form with your tax return. 

Note that you will have 180 days from the date of the sale or after your tax return is due (whichever is sooner) to close on the new property. The IRS is very strict with these deadlines.

Qualified Intermediaries Prepare 1031 Exchange

According to the rules set forth by the IRS, you need an authorized professional known as a Qualified Intermediary (QI) to facilitate the 1031 exchange. This is a neutral third party that will hold the proceeds from the sale of the property until you find a new replacement property and reinvest the funds. 

QIs must know how to handle these transactions to see investors through them. Those who fulfill this role are typically accountants, real estate attorneys, licensed real estate professionals, and title companies. 

Choosing the right QI means reaping a few benefits, such as: 

  • Securing your funds

  • Professional expertise

  • Advice and guidance

Why Choose a Title Company? 

Title companies can be incredibly valuable when a 1031 exchange is part of your strategy. For instance, they bring a lot of local knowledge to the table. They understand local real estate markets and regulations. 

A title team can handle more than just this transaction. They offer a comprehensive list of services, such as escrow, title searches, title insurance, and so much more. You can get everything handled easily all by one team. 

What’s more, if you choose a title team that is experienced, you can feel confident they know how to properly handle your 1031 exchange, too. You may even find that they have a streamlined process in place to ensure your transaction goes as smoothly as possible. 

Let Us Assist You With Your 1031 Exchange

At Blue Note Title, LLC we have experience successfully handling 1031 exchanges and we have streamlined processes in place to ensure that the entire transaction is hassle-free. If you are an investor looking to take advantage of this perk from the IRS, we are here for you. 

Contact us today to get started. 

Andy Maloney https://bluenotetitlellc.com