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Transaction Requirements
The process that the taxpayer follows is simple:
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The taxpayer enters into an exchange agreement with a qualified intermediary (QI), which outlines the QI's
responsibilities regarding the assignment of contracts, holding of proceeds, etc.
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The taxpayer then puts their relinquished property on the market for sale. Upon acceptance of a suitable offer,
the taxpayer enters into an assignable contract for the sale of his/her property and the contract is subsequently assigned
to the QI. The QI contacts the closing agent for the sale and directs the closing agent on the specifics of the exchange
transaction. The closing proceeds of the sale of the relinquished property are forwarded directly to the QI, where they
are held pending the closing on the purchase of the replacement property.
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The taxpayer then has 45 days from the closing of the sale of the relinquished property to identify replacement property.
Identification must be in writing to the QI. Closing on the replacement property must occur within 180 days from the
closing of the relinquished property.
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The taxpayer enters into an assignable purchase contract for the replacement property, and the contract is assigned to
the QI. The QI contacts the closing agent for the purchase and directs the closing agent on the specifics of the
exchange transaction. The QI delivers the funds from the exchange proceeds that are being held. The taxpayer
receives a deed for the replacement property directly from the seller.
NOTE: All terms in bold are defined in our
1031 Exchange Glossary.
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