1031 Scenario - Is Accommodating Party Needed?
I've done one 1031 exchange about 20 years ago and used an intermediary. The whole process was completed within about 40 days including identification and closing. That's the very limited extent of my knowledge.
What follows is a very different scenario that can close in the next 2 weeks because all of the contracts are already in place. I don't understand the role of the "Accommodating Party" when there appears to be no way for the seller of the 1 property (the exchange property) to "touch" the capital gain before it is used for the purchase of the 2 properties (the properties being exchanged into).
1 Property being sold as part of the 1031: Owned for 10 years, used as rental, capital gain will be $120,000
Purchaser of the 1 property is an arms-length purchaser unrelated to the seller essentially paying fair market value.
2 Properties being purchased (exchanged into) as part of the 1031: Rentals with total purchase price for the 2 properties of $110,000, both properties owned by the same person. $10,000 of the $120,000 gain will not be sheltered.
Proposed day of closing schedule:
10:00 AM - Seller of the 2 properties being exchanged into signs all regular closing docs, including deeds.
Noon - Purchaser of the 1 property being exchanged out of signs all regular closing docs. 100% of the purchase money is sitting in the title company escrow account having been wired there the day before.
2:00 PM - The seller of the 1 property being exchanged out of signs all of the regular closing docs related to the purchase of the 2 properties being exchanged into.
2:15 PM - The seller of the 1 property being exchanged out of signs all of the docs related to the sale of the 1 property being exchanged out of including the deed.
I'm struggling to understand where an Accommodating Party or an Intermediary is necessary. They may be, but, in my ignorance, I don't see why.
Is there additional documentation that is necessary? If so, is it not readily available somewhere?
Are there IRS requirements I am not aware of?
Thank you for your assistance.