1031 Exchanges

IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

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The Tax-Deferred Exchange Process

In a tax-deferred exchange, First Charlotte Escrow Corp. is appointed as the Qualified Intermediary prior to closing on the property being sold. The closing attorney is instructed to transfer the property to be sold to the buyer via direct deeding.

The exchange proceeds from the sale are deposited, by the Qualified Intermediary, into a separate interest-bearing escrow account. This complies with the IRS exchange requirement that the seller is not in actual or constructive receipt of the funds at any time during the exchange.

The seller, our client, must identify the “like-kind” replacement property within 45 days of the closing of the prior property and must close on the new purchase within a total of 180 days on the “like-kind” replacement property.
First Charlotte Escrow Corp. is assigned the contract for the replacement property. After

First Charlotte Escrow Corp transfers the exchange proceeds, to the law firm handling the replacement property closing, it instructs the seller of the property to transfer ownership from the seller to the client via direct deeding.

To Qualify for a Section 1031 Tax-Deferred Exchange……

Both the sold property and the newly pur-chased property in an exchange must be used for business or investment purposes and must be “like-kind” properties. Like-kind busi-ness or investment property includes com-mercial rentals, industrial property, residen-tial rentals, office condos, warehouses, land, farms, etc,.

The Seller of the first property must identify the new property for purchase within 45 days from the date the Seller relinquishes the old property, and the new property must be received by sending notice to First Charlotte Escrow Corp. within 180 days from that same date.

We recommend a threshold proceeds amount of at least 10,000 from the sale of the first property to cost-justify this transaction.

To Begin the Process

First, discuss the applicability of a tax-deferred exchange with your legal or tax advisor.
Before transferring the property, call First Charlotte Escrow Corp. to be your Qualified Intermediary.
First Charlotte Escrow Corp. will produce the required Exchange Agreement and other im-portant documentation.
Once an offer is accepted on the prior proper-ty, immediately seek replacement property. There is a 45-day time frame during which the replacement property must be identified. Give yourself plenty of time!
We strongly encourage that a “Cooperation Clause” be inserted in contracts both to sell and to purchase property.
Within 180 days of the transfer of the first property, the closing on the “like-kind” replace-ment property must occur.
At the direction of the client, First Charlotte Escrow Corp. will use the exchange proceeds from the sale of the prior property to acquire the like-kind exchange property. First Char-lotte Escrow Corp. also instructs the closer to transfer ownership from the seller to the client via direct deeding.

1031 Exchanges

The Tax-Deferred Exchange Process

To Qualify for a Section 1031 Tax-Deferred Exchange……

To Begin the Process

Contact Us About 1031 Exchanges

Need help? Contact one of our team members at the location of your convenience.

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