1. Be sure to do plenty of advanced planning for the exchange. Talk to your accountant, attorney, broker, financial planner, and lender to make sure that everything is in order for a successful transaction. Contact us if you have questions and we might be able to help you as well.

  2. The proper documentation must be used in order to comply with 1031 regulations. You must have a 1031 Exchange Agreement between the Exchanger and the Accommodator. This is the most important document in the Exchange. It is the document in which the Exchanger gives the Accommodator the right to acquire the relinquished property from the Exchanger and convey it to the buyer.

  3. Keep in mind the basic requirements needed to qualify for a complete tax deferral:

    A. Receive only "like-kind" replacement property.

    B. Use all proceeds from the relinquished property for purchasing the replacement property.

    C. Make sure the debt on the replacement property is equal to or greater than the debt on the relinquished property. (Exception: a reduction in debt can be offset with additional cash; however a reduction in equity cannot be offset by increasing cash.)

  4. It is a good idea to try and sell before you purchase. Occasionally Exchanges find the ideal replacement property before a buyer is found for the relinquished property. If this situation occurs, a "reverse" exchange (buying before selling) may be necessary. You should be aware that reverse exchanges are complicated and you should consult a qualified attorney or accountant before considering a reverse exchange.

  5. Do not miss your identification and exchange deadlines. Failure to identify within the 45-day identification period, or failure to acquire replacement property within the 180-day exchange period will disqualify the entire exchange.

  6. Do not try to do a 1031 exchange yourself by using your CPA or attorney to hold title or funds. IRS regulations require an Accomodator, to properly complete an exchange.

  7. Be sure not to dissolve partnerships or change the manner of holding title during the exchange. A change in the Exchanger's legal relationship with the property may jeopardize the exchange.