A concurrent exchange, also known as a “simultaneous exchange,” is a 1031 exchange in which the relinquished property and the replacement property are transferred simultaneously. This means that the investor can immediately close on selling the relinquished property before acquiring the replacement property.
One of the significant benefits of a concurrent exchange is that it allows investors to avoid the typical “boot” or cash often associated with a traditional 1031 exchange. In a concurrent exchange, the investor does not need to wait for the sale of the relinquished property to close before purchasing the replacement property. This means that the investor can use the entire proceeds from the sale of the relinquished property to acquire the replacement property, thereby avoiding any tax liability on the cash that would have been received in a traditional exchange.
- The relinquished and replacement property must be transferred atsimultaneouslyThe investor must have a valid purchase and sale agreement for both the relinquished and replacement properties.
- The investor has 45 days after the sale of the relinquished property to identify the replacement property.
- The replacement property must be received 180 days after the relinquished property is sold.
An investor owns a rental property they’ve held for several years. The property has been appreciated, and the investor is looking to sell it to invest in another rental property. If the investor chooses to do a concurrent exchange, they must have a valid purchase and sale agreement for both the relinquished and replacement properties. They must also identify the replacement property 45 days after selling the relinquished property and receive it 180 days after the sale.
- Consult with a qualified intermediary: It is always a good idea to consult with a qualified intermediary who can help ensure that the exchange is handled correctly and that all deadlines are met.
- Be prepared with backup properties: It’s essential to have backup properties in mind if the replacement property falls through so you can still meet the 45-day identification deadline.
- Have all the required documents ready: Make sure they have all the required documents, such as purchase and sale agreements, prepared before the exchange to meet all deadlines.
A concurrent exchange, also known as a “simultaneous exchange,” is a type of 1031 exchange in which the relinquished property and the replacement property are transferred atsimultaneouslyThis requires the investor to have a valid purchase and sale agreement for both the relinquished and replacement properties, find the replacement property within 45 days of selling the relinquished property, and receive the replacement property within 180 days.
Consult with an experienced intermediary, have all the required documents ready, and have backup properties in case the replacement property falls through so you can still meet the 45-day identification deadline. It is also recommended to have legal advice from an attorney to ensure the process is done correctly.
