Benchmark Title Company, LLC

 

1031 Exchanges - Part 2

John Howe

 

1031 Exchanges - Part 2

You must use a “Qualified Intermediary” also known as an “Accommodator”, as you may not take “constructive receipt” of the funds in any way or you WILL be taxed. It is the Accommodator who legally sells property “A” to buy property “B” on behalf of the client. The client still will choose the sale property and identify the replacement property, but the Accommodator is the legal vehicle through which the properties are transferred.

The accommodator guides the process and handles all the documents to enable the qualification, but they must be totally independent: They can not provide tax, legal, or financial advice to you. You will recall that I stated in my prior article that you should consult with your tax accountant and attorney throughout this process.

There are timing rules that must also be met or the exchange could be disqualified, and you will owe the appropriate tax on the gain.

Here is an example of how the transaction would work:

Prior to closing on the sale of the relinquished property, an exchange agreement needs to be signed with the Accommodator.  For my example Benchmark Title will be designated as the Accomodator.

At the closing of the sale, the net proceeds are immediately handed over to Benchmark Title as the accommodator and are held for the seller. Those funds can be invested in a separate account to earn interest for the benefit of the seller.

From the closing date the seller has 45 days to identify the replacement property and notify Benchmark, in writing, of the property identified (up to three properties may be identified). The seller must close on the purchase of the replacement property within 180 days. Holidays and weekends count as days and there is no variation from those timing issues. You can use fewer days than stated, but if you go over, the exchange will be disqualified and you will owe the appropriate tax.

In summary, you have sold one property, purchased another of equal or greater value and never touched the proceeds and any capital gain on the sale is tax deferred to a later date. Remember, it is a Tax Deferred exchange transaction approved by the IRS, not a TAX FREE exchange.

More to follow with a Q&A section on this very interesting topic.
 
Any questions can be directed to Benchmark Title at 618-239-3750. Please feel free to call or email:  

John Howe
President

Doreen Miller, Esq.
Vice President and General Counsel

Michelle Null
VP Escrow Operations

Bethany Bond
Marketing Director


Serving you from three convenient locations:

Main Office:
1124 Hartman Lane
Shiloh, IL 62221
Ph: 618-239-3750
Escrow Fax: 618-239-3707
Title Fax: 618-239-3757
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President: John Howe
www.benchmarktitle.net

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Fax: 618-281-9705
Manager: Randi Schur

4215 S. State Rte 159
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Fax: 618-288-1852
Manager: Sara Sowell




Benchmark Title is celebrating our 10 Year Anniversary!!!

With 10 years of the highest quality of service, & the most accurate product in the industry, we would like to say
Thank You for making us successful!!!!

Place your title orders on  March 21st and receive 10% off the title premium


Dates to Remember



March 25, 2008 - Please wish our employee Erin Warma a HAPPY BIRTHDAY!!!

March 26, 2008 - Ready, Set, Close! From Contract to Closing 9:00 am - 11:00 am  at the RASI Board Office. Contact RASI for information or to register.

March 28, 2008 - GGAR Annual Awards Banquet at Collinsville Gateway Center, Collinsville, IL
Reception 6 pm, Dinner 7 pm, Awards Presentation 8:30 pm, Comedian Mark Morfey 9:30 - 10 pm
$30 per person in advance, reservations required by March 12- Fax  to 618-692-8307 or Email to general@gatewayrealtors.com

March 29, 2008 - Please wish our employee Joni Evans a HAPPY BIRTHDAY!!

June 6, 2008 - First Horizon Golf Tournament for Habitat for Humanity at Arlington Golf Course.  Contact Jamie Hollenkamp at 618-288-8656 or at jhollenkamp@firsthorizon.com


 
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