1031 Exchange Requirements


In order to incur all the benefits of a tenant in common exchange, each exchange must satisfy all of the requirements.

  • First, 100% of the monies earned on the sale of the relinquished commercial real estate must be reinvested into the second commercial real estate.

  • Second, the debt on the like kind replacement commercial real estate must be equal to or greater than the debt held on the relinquished commercial real estate.

  • Third 1031 Exchange Requirement: The real estate investor must not have constructive receipt of the sale proceeds at any time during this exchange period or the money becomes taxable income. Typically, this is accomplished by using a professional exchange facilitator as a middleman to hold the sale proceeds and execute the exchange documents.

  • Fourth 1031 Exchange Requirement: Both relinquished and replacement commercial real estate must be like-kind. As used in IRC 1031(a), the words Like-Kind have reference to the nature or character of the commercial real estate and not to its grade or quality. One kind of class of commercial real estate may not, under that section, be exchanged for commercial real estate of a different kind or class.

    Contact us today to be put in touch with a qualified 1031 advisor for your next 1031 exchange.

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