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How
an IRC §1031 Exchange Works
Step 1: Investor contacts
Realty Exchange to coordinate the IRC § 1031 Exchange.
Step
2: When an investor decides to exchange, he first enters
into a contract to sell the property. All sale proceeds go
into a trust account designated for the exchange transaction.
Trust accounts are normally maintained by banks, trust companies
or other financial institutions.
Step 3: Investor designates replacement properties
within 45 days of the close of the escrow. The investor has
a maximum of 180 calendar days from the closing of the initial
sale to complete the exchange. Within the first 45 days of
this period he must designate candidate properties and properly
identify them to a party to the transaction. The investor
may target up to three properties regardless of value or a
group of properties with a combined value that does not exceed
200% of the value of the initial property sale. The funds
in the trust account can be used as earnest money for designated
property once all IRS requirements for an IRC § 1031 Exchange
transaction are met.
Step
4: The investor enters into a purchase contract and then
notifies Realty Exchange, Inc. of the replacement property
closing.
Step
5: Realty Exchange transfers ownership of the like-kind
replacement property to taxpayer.
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