1031 Exchange Rules

There are 5 rules that you must adhere to in a 1031 exchange. Learn about Net Selling Price, What Properties Qualify, What a QI does, the 45-day and 180-day rules.

1031 Exchange Rules

Net Selling Price (NSP)

To avoid capital gains tax on the sale of your relinquished property, you must spend an amount equal to or greater than your net selling price. (NSP equals selling price minus title fees and realtor commissions)

What Properties Qualify

You can exchange all real estate as long as you hold it for investment or productive use in a trade or business. House=Duplex=Land=Condo=Business Land=30-Year Lease=Deed for Deed

You Must Use a Qualified Intermediary (QI)

The regulations state that you use a QI to conduct your exchange. Your QI does three main things. First, they prepare the exchange agreement. Second, they escrow the proceeds after closing on the relinquished property. Third, they coordinate the exchange with all closing agents.

45-Day Rule

Within 45 days of closing on the sale, the Exchangor must formally identify their target replacement properties. They can identify up to 3 properties. If they wish to identify more than 3 properties, restrictions will apply.

180-Day Rule

You must close on one or more of your identified replacement properties within 180 calendar days of closing on your relinquished property.

Do You Have Questions?

These 5 rules are just the basics. 

If you'd like to go into greater detail on why to do a 1031 exchange, when you can do a 1031 exchange, and what the process looks like from start to finish based on your particular situation, let's have a conversation.

Equity 1031 Exchange is always available to discuss your transaction and review the 1031 exchange process step by step.

Contact us today for a free consultation on your situation!