1031 Exchange Requirements
1031 Exchange Requirement
To fully defer all capital gains taxes, all 1031 exchanges must meet four separate requirements:
First, 100% of all proceeds from the sale of the first income property must be reinvested into the second, replacement income property.
Second, the amount of equity ( income property value minus loan value) of the replacement income property must be equal to or greater than that of the relinquished income property.
Each exchange, including tenants in common exchanges, requires the use of a Qualified Intermediary to hold all proceeds of the transaction, prepare any paperwork, and answer any technical questions involved with the exchange.
Finally, a 1031 exchange is defined as the exchange of any like kind income property or income properties for another like kind replacement income property or income properties. As such, all income properties involved in the exchange must be qualified like kind income properties in order to incur the benefits involved with any 1031 tenants in common exchange.