Although it is easy to state the Three Simple Steps of a 1031 Exchange, that does not give a feel for the process. Here are the mechanics of a 1031 Exchange transaction with Liberty1031:

Step One

Complete the Client Worksheet and email a copy with your Contract for Sale back to Liberty 1031.  An Exchange Coordinator will contact you to confirm the details and will then e-mail your Phase 1 Documents to you and the Settlement Agent. The only change to the Sale Documents is showing the Seller on your Settlement Statement as Liberty 1031, Qualified Intermediary. At closing, Phase 1 Documents are signed followed by the Sale Documents. The closing proceeds are wired directly to Liberty 1031, as Qualified Intermediary.

Step Two

Within 45 days following your closing, you must identify replacement property(ies) by email or mail.

The following Rules of Identification apply:

The Three Property Rule: The Exchanger may identify up to three properties, without regard to their value

The 200% Rule: The Exchanger may identify more than three properties, provided their combined fair market value does not exceed 200% of value of the Relinquished Property

The 95% Rule: The Exchanger may identify any number of properties, without regard to their value, provided the Exchanger acquires 95% of the fair market value of the properties identified.

Most exchangers simply use the Three Property Rule, unless they have more than three potential replacement properties in mind.

Step Three

Acquisition of Replacement Property
Within 180 days, when you are ready to close on your Replacement Property, notify your Exchange Coordinator and email the Contract for Purchase and your Authorization to Release Funds to Liberty 1031 at info@liberty1031.com.

Your Exchange Coordinator will contact you to confirm the details, and then e-mail the Phase 2 documentation to you and the Settlement Agent. This documentation must be signed at your closing. In addition, the Buyer on your Settlement Statement must be changed to Liberty 1031 Exchange Services, LLC, as Qualified Intermediary.

Upon your approval, Liberty 1031 will sign the Settlement Statement, which is usually emailed prior to or during closing. The closing proceeds are then wired from Liberty 1031 to the Settlement Agent.

At this time, your successful 1031 Exchange will be complete.

Napkin Rule
You must buy a Replacement Property of equal or greater value to the Relinquished Property in order to completely defer the applicable capital gains and depreciation recapture taxes. If you purchase a property of lesser value, you will be responsible for any tax on the difference. You must also use all the cash proceeds from the sale on your purchase in order to completely defer the applicable capital gains and depreciation recapture taxes. If you do not use all your proceeds on the purchase, you will be responsible for any tax on the difference.

That’s It – The Complete Process! Fast, Secure, Easy