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1031 Exchange Requirements

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1031 Exchange Requirement

Four requirements for all 1031 exchanges and TIC exchanges:

  • One hundred percent of the value of the relinquished real estate must be reinvested in the like kind real estate or real estate at the time of the exchange.

  • The amount of equity held in the relinquished real estate must be less than the amount of equity held in the new, replacement real estate or real estate.

  • Third 1031 Exchange Requirement: The real estate investor mustn't have constructive receipt of the sale proceeds during the exchange period or else all funds become taxable income. Typically, this is accomplished using a professional exchange facilitator to hold sale proceeds and execute the exchange documents.

  • Fourth 1031 Exchange Requirement: Both relinquished and replacement real estate must be like-kind. As used in IRC 1031(a), the words Like-Kind have reference to the nature or character of the real estate and not to its grade or quality. One kind of class of real estate may not, under that section, be exchanged for real estate of a different kind or class.

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