You are using an outdated browser. For a faster, safer browsing experience, upgrade for free today.

Resources

Safe & Secure –

That means Insured, Bonded, Vetted & Backed


The safety and security of your money is our first priority. To develop our internal policies and procedures, we surveyed all facets of the industry (qualified intermediaries, title companies, depository institutions, insurance carriers, etc.) for industry standards and best practices. Then we instituted internal safeguards, procured insurance and partnered with financial institutions that go beyond those standards.

Fidelty Bond Certificate -

E & O Insurance Certificate -

Credit ratings of BB&T -

Funds are held in segregated bank accounts for the benefit of the named taxpayer. And funds cannot be disbursed without the written authorization of the taxpayer and two members of Safe 1031 management/ownership.

IRS Information & Forms


Like-Kind Exchanges - Real Estate Tax Tips - Download HERE

Instructions for Form 8824 Like Kind Exchanges - Download HERE

Form 8824 – Like Kind Exchanges - Download HERE

IRS Fact Sheet on Like-Kind Exchanges Under IRC Code Section 1031 - Download HERE

What is a Tax Deferred Exchange?


§1031 of the Internal Revenue Code allows taxpayers to build wealth and save taxes by deferring taxes. When a taxpayer disposes of real property and acquires a Replacement Property, that taxpayer may defer the tax ordinarily due upon the sale if the transaction meet certain IRS safe harbors.

To insured sale proceeds aren’t taxed and the transactions meet IRS safe harbor requirements, prudent taxpayers use a Qualified Intermediary, such as Safe 1031.

What is the Process?

STEP 1. Contact Safe 1031. In advance of selling a property, let us know you’d like to do an exchange. We will prepare the Deferred Exchange Agreement, Assignments and other documents to be signed prior to selling your property.

STEP 2. Include an “Exchange Cooperation Clause” in the contracts.

Examples:

  • Relinquished Property

    “Notwithstanding anything to the contrary, Buyer hereby acknowledges that it is the intent of Seller to effect an IRC §1031 tax deferred exchange, which will not delay the closing or cause additional expense to Buyer. Seller’s rights under this agreement may be assigned to Safe 1031, as Qualified Intermediary, for the purpose of completing such an exchange. Buyer agrees to cooperate with Seller and Safe 1031, LLC in a manner necessary to complete the exchange.”

  • Replacement Property

    “Notwithstanding anything to the contrary, Seller hereby acknowledges that it is the intent of Buyer to effect an IRC §1031 tax deferred exchange, which will not delay the closing or cause additional expense to Seller. Buyer’s rights under this agreement may be assigned to Safe 1031, LLC, as Qualified Intermediary, for the purpose of completing such an exchange. Seller agrees to cooperate with Buyer and Safe 1031, LLC in a manner necessary to complete the exchange.”

STEP 3. Consult your legal and tax advisors throughout the exchange. A taxpayer’s role is an exchange is straightforward. And Safe 1031 will keep the process smooth. But this is a complex legal transaction with tax consequences. And Safe 1031 cannot provide you with tax or legal advice.

STEP 4. Look for acceptable Replacement Property promptly to meet the strict 45-day Identification deadline.

What is Like Kind Property?


The Relinquished and the Replacement Properties must be owned by the taxpayer either for investment purposes or for use in a trade or business.

Both properties must also be “like-kind.” This refers to the nature or character of the property. Most real property in the United States is “like-kind” to all other domestic real property. But IRC § 1031(a)(2) does note real property held primarily for sale does not qualify for tax deferral.

Deadlines & Requirements


There are two critical deadlines in an exchange.

Identification Period: Within 45 calendar days of the transferring the Relinquished Property, the taxpayer must identify the Replacement Property.

Exchange Period: The Exchanger must receive the Replacement Property on or before the earlier of: (i) the 180 days after transferring the Relinquished Property, or (ii) the due date (including extensions) for the tax return for that transfer.

These deadlines are very strict. They won’t be extended (even if they fall on a Saturday, Sunday or legal holiday) – unless the taxpayer qualifies for a disaster extension under Rev. Proc. 2007-56.

Replacement Property may be identified by either:

1. Completing the purchase of the Replacement Property within the Identification Period; or

2. Identifying in a written document (Identification Notice), signed by the taxpayer, and delivered prior to the end of the Identification Period, to the Qualified Intermediary.

The description of the Property must be specific and unambiguous and include:

a) the legal description,

b) a street address, or

c) a distinguishable name.

No changes or revocations may be made after the Identification Period. But taxpayers may identify multiple or alternate Replacement Properties. There are three important rules to selecting Replacement Properties.

Three Property Rule: A taxpayer may identify, as potential Replacement Properties, any three properties, without regard to their fair market value.

200% Rule: A taxpayer may identify, as potential Replacement Properties, any number of properties, provided the aggregate fair market value (as of the end of the Identification Period) of all of the identified properties does not exceed 200% of the aggregate fair market value of all of the Relinquished Properties.

95% Exception: If a taxpayer identifies more potential Replacement Properties than allowed under either the Three Property or the 200% Rules, it will be treated as if no Replacement Property was identified unless the taxpayer actually receives Replacement Property by the end of the Exchange Period worth at least 95% of the aggregate fair market value of all of the identified Replacement Properties.

Terminology


Exchanges under IRC §1031 have their own language. This can be confusing. So here are some definitions of often used exchange terms and phrases.

Boot: The value of any non-qualified property received in an exchange.

Constructive Receipt: The ability to control or receive proceeds by a taxpayer even if not directly in his or her possession.

Exchange Period: When the taxpayer must acquire the Replacement Property. It starts on the transfer of the Relinquished Property and ends on the earlier of: (i) 180 days later or (ii) the due date (including extensions) for the tax return for the transfer.

Identification Period: When the taxpayer must identify the Replacement Property. The Identification Period starts on the transfer of the Relinquished Property and 45 days later.

Like-Kind Property: Properties with the same or similar nature or character, regardless of differences in grade or quality. Most all real property located within the United States is considered to be “like-kind”.

Qualified Intermediary: The person or entity that facilitates the exchange for the Exchanger. Other common terms are “exchange facilitator” or “exchange accommodator”. A Qualified Intermediary must meet the criteria spelled out in Treas. Reg. 1.1031(k)-1(g)(4).

Relinquished Property: The property sold by the taxpayer.

Replacement Property: The property purchased by the taxpayer.