The seller cannot receive or control the net sale proceeds – the proceeds must be deposited with a Qualified Intermediary.
The replacement property MUST be:
1) “like-kind” to the relinquished property – Both the relinquished and the replacement properties must have been held for investment purposes or for productive use in a trade or business.
2) identified within 45 days from the sale of the original property
3) acquired within 180 days from the sale of the original property
The cash invested in the replacement property must be equal to or greater than the cash received from the sale of the relinquished property.
The debt placed or assumed on the replacement property must be equal to or greater than the debt received from the relinquished property.
This is a summary of some of the key guidelines for a transaction under Section 1031, but this is not an exhaustive list. The costs associated with a Section 1031 exchange may impact the returns and may outweigh the tax benefits of the transaction. Each prospective investor must consult his or her own tax advisor regarding the qualification of a particular transaction under Section 1031.