An assignment agreement is a legal contract between the owner of a property and a qualified intermediary (QI) in a 1031 exchange. The assignment agreement assigns the rights of the property to the QI, allowing the QI to hold the proceeds from the sale of the original property and use them to purchase the replacement property.
- An assignment agreement is a legal contract between the owner of a property and a qualified intermediary (QI) in a 1031 exchange.
- The assignment agreement assigns the rights of the property to the QI, allowing the QI to hold the sale proceeds from the original property and use them to purchase the replacement property.
John wants to sell his rental property and use the proceeds to purchase a replacement property through a 1031 exchange. He engages a qualified intermediary (QI) to handle the exchange process. The QI and John sign an assignment agreement, which assigns the rights of the original property to the QI. The QI holds the sale proceeds from the original property and uses them to purchase the replacement property, allowing John to defer paying capital gains taxes on the sale of the original property.
- Ensure the assignment agreement is legally binding and compliant with IRS requirements.
- Review the assignment agreement thoroughly before signing to understand the rights and responsibilities of all parties involved.
- Consult with a tax professional and a qualified intermediary (QI) to fully understand the implications and requirements of an assignment agreement in a 1031 exchange.
- Consider the use of a qualified intermediary (QI) when conducting a 1031 exchange to ensure that the exchange meets IRS requirements and to avoid actual receipt of the sale proceeds.