Six Myths About 1031 Exchanges - Part 2

So you want to do a 1031 exchange, but you’re not sure where to start. You’ve heard a lot of crazy things about this great tax-deferral strategy, so you’re just not sure. In a recent post, we’ve taken the guesswork out of 1031 exchanges by debunking some of the most common myths. Read on for a few more.

A taxpayer cannot complete a 1031 exchange with a related party.

FALSE! Related parties can buy or sell property in a valid 1031 exchange. When related parties (e.g., parents, spouses, children, siblings, etc.) exchange property, the related party is obligated to own the property for at least two years following the exchange before selling or exchanging it again. Failing to adhere to the Two-Year Rule will render the 1031 exchange invalid.

The 180-Day rule can be extended.

FALSE! The IRS is very strict when it comes to enforcing the time limitations imposed on 1031 exchanges. Like-kind exchanges must be completed within 180 days after the deed transfer date of the relinquished property (or the replacement property in the case of a reverse exchange). This means if the 180th day falls on a Saturday, Sunday or holiday, closing must occur on or before that date – waiting until the next business day will cause the exchange to fail.

To find out how we can help you find and close on your next 1031 exchange property or to learn more about the exchange process and our qualified intermediary services, please visit our website.