The assignment of contract rights in a 1031 exchange refers to the transfer of the rights to purchase a replacement property from the original owner to a qualified intermediary (QI). This transfer allows the QI to hold the sale proceeds from the original property and use them to purchase the replacement property on behalf of the original owner.
- The assignment of contract rights in a 1031 exchange refers to the transfer of the rights to purchase a replacement property from the original owner to a qualified intermediary (QI).
- This transfer allows the QI to hold the sale proceeds from the original property and use them to purchase the replacement property on behalf of the original owner.
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. Through the assignment of contract rights, John transfers the rights to purchase the replacement 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 of contract rights meets IRS requirements for a 1031 exchange.
- Review the terms and conditions of the assignment of contract rights thoroughly before signing.
- Consult with a tax professional and a qualified intermediary (QI) to fully understand the implications and requirements of the assignment of contract rights 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.
