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1031 Exchange Requirements

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1031 Exchange Requirement

There are four distinct requirements applicable to all 1031 exchanges :

  • In order to qualify as a 1031 exchange, 100% of the monies earned through the sale of any investment property must be reinvested in the replacement investment property.

  • Also, the amount of equity held in any like kind investment property for reinvestment must be greater than or equal to that of the relinquished investment property.

  • QI Requirement - According to IRC section 1031, all exchanges must be processed with the help of a Qualified Intermediary.

  • Like-Kind investment property, Defined - The IRS Code defines 'like kind investment property as any investment property held for productive use in a trade or business or held for investment purposes. According to said code, 1031 exchanges must be the exchange of one or more like kind investment properties for a separate like kind investment property or investment properties.

    Due to restrictive timing rule of IRC 1031, taxpayers wishing to engage in a tax-free like kind exchange are under pressure to identify and acquire suitable investment property. Accordingly, many property owners have failed to find suitable replacement investment property. With this in mind, the tenants in common structure was specifically designed to provide persons seeking to engage in a tax-free like kind exchange with a viable replacement investment property solution.




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