Mistakes sellers make on 1301 Exchangers. per Texas Association of Realtors

August 09, 2022 | Texas REALTORS® Staff

An IRS 1031 exchange, also known as 1031 exchange or like-kind exchange, is a tax-favored transaction where the seller can take the proceeds from the sale of a property and reinvest it into another replacement property to defer capital gains or losses that otherwise would have been realized at the time of the sale. The process can go smoothly if done correctly, but missteps can lead to legal consequences, loss of the financial gain, or a failed transaction. The Texas Real Estate Research Center recently published an article that addresses eight mistakes that can occur when participating in a 1031 exchange. Here are some of those mistakes:

Waiting Too Long

When attempting a 1031 exchange, advanced planning is essential. Like-kind exchanges are specifically for properties held for trade or business use or for investment purposes. Clients should consult with their own tax advisors or tax or real estate attorneys on whether a 1031 exchange will be beneficial for them and to ensure the replacement property meets the 1031 criteria. Real estate attorneys and title officers point out that sellers can miss out on these opportunities by not being aware of 1031 exchanges till closing, but by then, it is too late.

Replacement Property Downfalls

In a 1031 exchange, a seller has 45 days to choose a replacement property, which can be a short amount of time concerning identification, negotiation, and financing of the property.

Sellers should be aware of this 45-day window, keeping track of the exact deadline and if it falls on a holiday or a weekend.

Another blunder sellers make is not having multiple replacement properties identified. Sellers can miss out on a deadline due to revoking the identification of a property late in the 45-day window and not having a secondary property to invest in.

The Importance of a Qualified Intermediary

Being a part of a 1031 exchange can put sellers at risk if everything does not go smoothly. It is important to have not just anyone overseeing the transaction but a highly qualified intermediary who has a good reputation and experience. Failure to do so can result in a mismanagement or loss of funds or a breach of contract lawsuit. Identifying a qualified intermediary can be difficult due to an unregulated marketplace. Sellers should contact private intermediaries, tax advisors, tax attorneys or real estate attorneys, for these types of transactions and for help in identifying qualified intermediaries who can assist on such transactions.

Read the full article discussing other mistakes sellers make while completing a 1031 exchange.

Comments

Sad News. Tim Harrington of Austin, Texas passed away in mid-February 2024 from a heart attack. His Memorial Service is 2/29/2024 2 pm, @ Austin Ridge Bible Church in Westlake.

The Above Photo was taken by Jim Innes during his Podium Eulogy talk for Tim Harrington. To Say the Westlake Austin Ridge Bible Church memorial service was PACKED, would be an understatement. Tim Harrington was a good man, and friend of many. He was relatable, authentic, funny, caring and social. George Vance..... Just making sure you know that Tim Harrington passed away last weekend. Heart attack. Tim’s Memorial Service will be: 2/29/24 at 2 PM at Austin Ridge Bible Church at 9300 Bee Cave Rd, Austin, TX 78733 in Westlake. At the Worship Center building. Please spread the word. GVM speaking here, "Tim showed up on my 40th birthday at Pitch N Putt for an afternoon of golf and bullshit. Tim was in good spirits that afternoon after boasting of his mega million dollar commercial fresh sale in SoCo. St. Elmo @ the ol' Hills Cafe. Tim was a former SOUTHWESTERN door to door salesman and alumnus like me. A fellow bookman. Tim showed up @ my BookPeople booksigning event, for th

The Future of Clarksville & Old West Austin? West 12th and West Lynn Blvd. Recap of Meeting Between the Neighborhood & Zydeco Development.

Recap of Meeting Between the Neighborhood & Zydeco Development That the CCDC Organized On December 6 th , the principals of Zydeco Development, Meghan Yancy and Wes Gilmer, as well as Miguel Rivera with Miro-Rivera Architects, talked with neighborhood residents about its plans for redeveloping thebuilding that formerly housed Nau’s, and where Anthony’s is still located, the parking lot between Anthony’s and Café Medici, the house where the coffee house is located, and the two houses on Eason that back up to the parking lot. Zydeco, a small, local real estate development firm founded by Howard Yancy, closed on all of this real estate about three months ago. Miguel Rivera who lives on Patterson, is Zydeco’s architect for the project. Meghan lives on 14 th Street. During the meeting, Miguel and Meghan emphasized that they understand how important the properties along West Lynn are to the neighborhood, especially the “Nau’s building,” because they are neighbors. Meghan explained

Keeping Up with ATX local and Real Estate Broker George Vance McGee....

So GVM, how are you feeling these days? What is the married, family man, new dad lifestyle? Thanks for asking. Believe it or not, despite my youthful glow and aura, I'm now "over the hill" at 42 years of age. Physically I still feel pretty darn good. I try to cycle often on the hike and bike trail of lady bird lake. I've even bought a bicycle rack for my 2010 Nissan Rogue SUV. As a Real Estate Industry person, I apologize if my lack of a Range Rover or Mercedes Benz car ownership doesn't suffice. In regards to health, being a newborn dad will really sober you up. Coffee has long since replaced booze in my blood system. When you routinely wake up circa 7:00 am to hug your baby daughter, change her diaper, feed her, have playtime and then drive her to daycare/preschool you need to feel healthy, rested and alert. 1 thing I do miss as a responsible married family man, is the carefree, outgoing, live music and bar hopping nightlife of Austin, Texas. Let's be hone

Search This Blog