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How To Begin
Planning is a critical element in any Section 1031 exchange.
It is extremely important for taxpayers to contact IPE 1031
prior to undertaking a Section 1031 tax-deferred exchange.
Taxpayers must structure Section 1031 transactions so they fall
within one of the safe harbors provided by the I.R.S. Taxpayers
who utilize IPE 1031 as the accommodator for their exchange will
fall within the qualified intermediary safe harbor. At a
minimum, taxpayers should contact IPE 1031 as soon as possible
and prior to closing on the sale of their relinquished property(ies).
Clients desiring to execute a Section 1031 exchange should
include cooperation language in the relinquished property
purchase and sale agreement. IPE 1031 will provide exchanging
taxpayers and/or their tax/legal advisors with suggested
language for the purchase and sale agreement detailing the
taxpayer’s intent to execute a Section 1031 exchange. For a
delayed exchange, an example of such language follows.
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It is the intention of seller to transfer the above-listed
property pursuant to Internal Revenue Code Section 1031, which
sets forth the requirements for tax-deferred real estate
exchanges. Seller’s rights and obligations under this and future
agreements will be assigned to IPE 1031, qualified intermediary,
for the purpose of completing an exchange. Buyer of the
above-listed property agrees to cooperate with seller and IPE
1031 in a manner necessary to enable seller to complete said
exchange. Such cooperation shall be at no additional cost or
liability to buyer. |
IPE 1031 will consult with the taxpayer and/or the taxpayer’s
team of tax/legal advisors to aid in the successful
implementation of the exchange. Step-by-step, detailed
instructions are provided to each client and to the client’s
advisors.
PLEASE NOTE: Careful attention must be paid by the exchanging
taxpayer to ensure that a qualified intermediary has been
retained prior to the sale of the relinquished property, that
closing on the relinquished property does not occur without
execution of appropriate exchange documents and that the
taxpayer or the taxpayer's agents do not receive any of the
proceeds from the sale. Additionally, absent additional planning
and documentation, it is not possible to close on the purchase
of replacement property prior to closing the sale of the
relinquished property. In this case, a reverse exchange must be
implemented. Please contact IPE 1031 for more information if you
are considering a reverse exchange transaction.
Tax and legal consequences may have a dramatic impact on a
taxpayer’s decision as to whether he or she should utilize
Section 1031. The I.R.S. requires that we remain an independent
third party to your exchange transaction. As a result, several
areas exist in which IPE 1031 cannot advise taxpayers or their
agents. IPE 1031 cannot serve as a tax or legal advisor, and can
only answer questions related to its role in the exchange and
Section 1031 requirements. Taxpayers are strongly encouraged to
speak with tax and legal advisors before an exchange.
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