DO advanced planning for the exchangeTalk to your accountant, attorney, broker, financial planner, lender, and Qualified Intermediary prior to exchanging and possibly investing in a DST.
DO keep in mind these three basic rules to qualify for complete tax deferral:
- Receive only “like-kind” replacement property
- Use all proceeds from the relinquished property for purchasing the replacement property
- Make sure the debt on the replacement property is equal to or greater than the debt on the relinquished property. (Exception: A reduction in debt can be offset with additional cash; however, a reduction in equity cannot be offset by increasing debt).
DO attempt to sell before you purchase
Occasionally exchangers find the ideal replacement property before a buyer is found for the relinquished property. If this situation occurs, a “reverse” exchange (buying before selling) may be necessary.
DO NOT miss your identification and exchange deadlines
Failure to identify within the 45-day identification period, or failure to acquire a replacement property within the 180-day exchange period, will disqualify the entire exchange resulting in the sale of the downleg property being fully taxable. Reputable Intermediaries will not act on back-dated or late identifications.
DO NOT try doing a 1031 Exchange using your attorney or CPA to hold title or funds
IRS regulation requires a Qualified Intermediary to properly complete an exchange. Call us for the name of one that operates in your area.
DO NOT dissolve partnerships or change the manner of holding title during the exchangeA change in the Exchanger’s legal relationship with the property may jeopardize the exchange.
This is for educational purposes only, does not constitute an offer to buy/sell securitized real estate investments, and is not meant to be interpreted as tax or legal advice. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. Please speak with your legal and tax advisors for guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC, an SEC registered investment adviser. Insurance offered through Concorde Insurance Agency, Inc. Fortitude Investment Group is independent of CIS, CAM and CIA.