1031 Exchange - factors for selecting Accomodator

[Richard Chang]

Hi all,

Can the experts lend a hand in what to watch out for when picking a company to handle the exchange ?

1. Should the company be in the same state for the purchasing side to understand any relevant laws and local issues ?

2. How to avoid issues with company mishandling of funds ( liability ) ?

3. What guidelines should be used in selecting the company ?

4. If the company screws up then my 1031 Exchange is disqualified and then would be taxable ?

Thanks, Rich

[Dave Foster]

@Anne Holland, what's "worth it" is totally up to each individual.  The cost of a 1031 is around 500 - 1000.  You'll have some procedural rules you'll have to adhere to and one more form to file in that tax year but other than that it's a question of how much tax it takes to move you from gritting your teeth to screaming in pain!l  In your case, you're easily looking at a 25% hit on that 60K not counting depreciation recapture. Only you can answer that question of "Is it worth saving/deferring that 15K+.  Some will  point to the fact that it's only deferred.  Some will remind you that there are ways to keep from paying the tax throughout your life and in some cases it may be possible to eliminate it all together.  

One thing that might help you weigh the options better is that you do not have to go back into commercial at all. The use (actually the intent of use) not type of property is key.  So as long as you buy it with the intent to use for productive use in business trade or for investment it will qualify.  So if you wanted to exit the commercial game altogether and go into residential or raw land, It would all work.