Delayed 1031 Exchanges

The delayed exchange is common and straightforward: the Exchangor relinquishes property before he acquires property. In other words, the property the Exchangor owns (called the “relinquished” property) is transferred first. The property the Exchangor wishes to own (called the “replacement” property) is acquired second.

Before the delayed exchange is initiated, the Exchangor is responsible for marketing his property, securing a buyer, and executing a sale and purchase agreement. The Exchangor’s obligation to sell the relinquished property is then assigned to Equity Advantage. By the assignment, Equity Advantage transfers the relinquished property to the buyer. Equity Advantage then receives money (exchange proceeds) from the buyer for the relinquished property.

Within 45 days of the relinquished property transfer, the Exchangor must identify replacement property to acquire. The Exchangor negotiates the purchase terms for the replacement property with the seller and executes a purchase and sale agreement. The Exchangor’s obligation to buy the Replacement property is then assigned to Equity Advantage. The assignment allows Equity Advantage to use the exchange proceeds (in addition to other funds provided by the Exchangor) to purchase the replacement property.

Equity Advantage is mandated by IRC 1031 to transfer the replacement property to the Exchangor within 180 days of the relinquished property transfer.

EXCHANGOR’S GUIDELINES TO ACCOMPLISHING THE DELAYED EXCHANGE