Elsewhere in this blog, we gave a brief overview of what a 1031 Exchange actually entails. However, there are many details that can make or break such a deal that all landowners must legally adhere to. A 1031 Exchange will fail if it does not comply with all seven specific requirements of the code. Knowing the nuts and bolts will help you understand nearly everything that goes into a 1031 Exchange.
In the first part of our two-part series, we will delve into the first three requirements every 1031 Exchange needs to meet:
The old property and the new property to be bought must be like-kind, as it relates to the usage of the land itself. Like-kind means that both pieces of property must be held for investment or utilized in a trade or business. A primary residence can never be used in a 1031 Exchange, and property that is held just for resale does not qualify.
In the first part of our two-part series, we will delve into the first three requirements every 1031 Exchange needs to meet.
45-Day Identification Period
The new property must be identified within 45 days of the sale of the old land. The time period begins the day after the closing has been finalized and are all calendar days. There are no extensions under any circumstances, although up to three different properties can be identified. This can be accomplished by giving the addresses to the intermediary.
180-Day Purchase Period
The purchase and closing of the new property must happen by 180 days after the close of the sale of the original property, a timeframe that runs concurrently with the ID period. The intermediary must distribute the funds on this date, and there are no extensions available.
If you are interested in expanding your recreational property, be sure to contact a loan officer from Heritage Land Bank as soon as possible! Take a look at the rest of our website to learn more about all of the different financial options that we offer to our customers.