1031 Exchange??
With regards to 1031 exchanges...
How does the financial Intermediary get paid? Do they take a percentage of the escrow account amount?
I'm looking for DaveT specifically for this, but if anybody else has experience with these exchanges, I would be more than glad to hear what you have to say!
Thank you,
Matty Kling
We are in the process of doing 2 1031 exchange's here in California. We are useing Old Republic Exchange to handle the transaction for us. They get a flat fee of $600.00 per each exchange.
I went to my bank trust department and asked one of the officers to serve as my exchange escrow agent. They agreed for a flat $500 fee. The exchange escrow agent deducted their fee from the income my money earned while waiting to complete the acquisition of my replacement property.
If the income was not sufficient to cover the fee, then my deposited principal would have been debited before distributing funds to the settlement agent handling my replacement property closing.
Thanks for the imput!!!
On Another note about 1031 exchanges: How long can you keep the money in the account before executing your next purchase?? Is there a time restriction??
Thanks!
Matty Kling
Once your proptery closes and the funds are in escrow you have 45 days to describe the replacement property and then you have a total of 180 from for the date of the sale to complete the deal. if not completed in the required 180 days all fund become boot and uncle sam gets his share of you capital gains. You can claim 3 replacement propertys with one exchange.
So you have 45 Days to find a property and explain it??? And then another 180 to close on it?
I guess my question is what do you mean by the explain it within 45 days? Explain the type of property interested in(i.e. single family, mulit, commercial, etc)or the specific property that you are purchasing (123 Main St)???
And then what's the 180 days for??
Sorry for the stupid questions...
Thanks for the good answers!
Matty Kling
although i've never done it, my understanding is that you have 45 days to show the property ur going to use.
this means pulling mls listing on a house and submitting it.
you then have 180 days to find a house and close on it.
you do NOT have to close on the same property you used to fulfill the 45 day requirement.
The 45 day and the180 day deadline.
Begining with the close of the relinquished property, you have 45 days to identify the properties you intend to purchase . And the 180 days you have to complete the aquisition of those properties. Ther is no extentions on the 45 day deadline. Your identification must be recieved on the 45th day.
Quote:although i've never done it, my understanding is that you have 45 days to show the property ur going to use.
this means pulling mls listing on a house and submitting it. you then have 180 days to find a house and close on it.
you do NOT have to close on the same property you used to fulfill the 45 day requirement. A lot of incorrect information is posted here. Let's see if I can set the record straight.
As the exchanger, starting from the day you complete settlement on your relinquished property, you have 45 days to IDENTIFY your replacement property. To properly identify your replacement property(ies), a signed letter to your escrow exchange agent that lists the addresses (or legal descriptions, or distinguishable names) of the proposed replacement property(ies) is sufficient.
During that initial 45 day period, you may change your mind and submit a new letter which revokes your original identification and substitutes up to three new proposed replacement properties. You may do this as often as you wish until the 45 day window closes. You may not change your mind after the 45th day.
Within 180 days from the date you completed settlement on your relinquished property you MUST purchase one or more of the properties you previously identified to preserve the exchange.
The exchange is voided and the sale of your relinquished property becomes a taxable event for any of the following reasons:You fail to identify up to three replacement properties within the 45 day identification window, or,
You fail to purchase a replacement property from your list of identified properties within the 180 day exchange limit, or,
You have constructive receipt of the proceeds from the sale of your relinquished property, or,
You file your income tax return for the year in which your replacement property is sold, but you have not yet completed the exchange (even though your 180 day exchange umbrella has not elapsed). This last point deserves a little more discussion. Filing a tax return on time can make a tax-deferred exchange taxable. Let's say you settle on your relinquished property on December 1, 2004. You would have 180 days or until May 30, 2005 to complete your exchange. Filing your 2004 tax return on April 15, shortens your exchange term to 135 days. If you need the full 180 days to complete the exchange, then you need to obtain an extension to file your tax return after May 30, 2005.[ Edited by DaveT on Date 04/04/2004 ]
Dave is right on the money. Great answer!