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1031 Exchange Requirement

To fully defer all capital gain taxes, the 1031 exchange must meet four 1031 Exchange Requirements:

Reinvest 100% of Proceeds: The value of the 1031 exchange property being purchased must be equal to or greater than the value of the investment property being sold.

  • Debt on replacement investment property is equal to or greater than the debt on the relinquished investment property.

  • Third 1031 Exchange Requirement: The third requirement of Section 1031 exchanges is that you must use a Qualified Intermediary (QI). The QI prepares the exchange documents, holds the cash proceeds from the sale, and should answer any questions you may have during the exchange.

  • Fourth 1031 Exchange Requirement: Both relinquished and replacement investment property must be held for productive use in a trade or business or held for investment and investment property must be like-kind. Like-kind refers to the nature of the investment property. The IRS definition of Like-Kind is any investment property held for productive use in a trade or business or held for investment purposes.

    In order to complete your next 1031 exchange or tenants in common exchange, contact us today. We can put you in contact with a specialized TIC advisor at no cost to you.