Document Preparation

**This service requires both Assurance Title

and Secure 1031 Exchange Services, LLC to accomplish!**

The 1031 exchange, or like-kind exchange, is a provision in the IRS tax code (Section 1031) that allows real estate investors to defer paying capital gains taxes on the sale of an investment property, provided they reinvest the proceeds into another similar ("like-kind") investment property.

This is a tax-deferral strategy, not an exemption; the tax basis carries over to the new property, and taxes are only paid when the investor ultimately sells the last property for cash.

The most common structure is the Delayed Exchange, which requires strict adherence to the following rules:

1. Qualified Intermediary (QI)
The investor cannot touch the sale proceeds of the relinquished (old) property. A Qualified Intermediary (QI) must be hired before the sale closes. The QI holds the funds in escrow throughout the exchange period to prevent the investor from receiving "constructive receipt," which would immediately trigger the taxes.

2. "Like-Kind" Property
Both the property being sold and the property being purchased must be held for investment or business use (not a primary residence or personal vacation home). The definition of "like-kind" for real estate is broad; for example, you can exchange a rental house for vacant land or an apartment building for a commercial property, as long as both are U.S.-based investment properties.

3. Strict Timelines
There are two non-negotiable deadlines that run concurrently from the closing date of the relinquished property:

45-Day Identification Rule: The investor has 45 calendar days from the sale of the relinquished property to officially identify potential replacement properties in writing to the QI. The investor can generally identify up to three properties regardless of value.
180-Day Closing Rule: The investor must close on the purchase of one or more of the identified replacement properties within 180 calendar days of the sale of the relinquished property.

4. Equal or Greater Value Rule
To defer 100% of the capital gains tax, the investor must:

Reinvest all the cash proceeds from the sale.
Purchase a replacement property that is equal to or greater than the sale price of the relinquished property.

If the investor receives any cash or has a lower mortgage on the new property (known as "boot"), that portion is immediately taxable.

It is important to remember that Assurance Title cannot server as both your Qualified Intermediary and your Title Agent. With this limitation we assist structuring these transactions by coordinating between our client and Secure 1031 Exchange Services, LLC and then conduct the primary and secondary acts of sale necessary to accomplish your exchange.