1031 Exchange Requirements

1031 Exchange Requirement

Four requirements for all 1031 exchanges and TIC exchanges:

One hundred percent of the value of the relinquished investment property must be reinvested in the like kind investment property or investment properties at the time of the exchange.

The amount of equity held in the relinquished investment property must be less than the amount of equity held in the new, replacement investment property or investment properties.

QI Requirement - According to internal revenue code, all exchanges must be processed with the help of a Qualified Intermediary.

Like-Kind investment property, Defined - The IRS Code defines 'like kind investment property as any investment property held for productive use in a trade or business or held for investment purposes. According to said code, 1031 exchanges must be the exchange of one or more like kind investment properties for a separate like kind investment property or investment properties.

Due to restrictive timing rule of IRC 1031, taxpayers wishing to engage in a tax-free like kind exchange are under pressure to identify and acquire suitable investment property. Accordingly, many investment property investors have failed to find suitable replacement investment property. With this in mind, the TIC structure was specifically designed to provide persons seeking to engage in a tax-free like kind exchange with a viable replacement investment property solution.