What To Expect in the Affiliated
1031 Exchange Process

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 Aliated 1031:

Step One

Contact Affilaited 1031 to discuss the possibility and opportunity of a 1031 exchange transaction prior to the closing date of the property. Please provide Affilaited 1031 with a copy of the contract, if attainable, and contact information for the closing agent in the transaction. Affilaited 1031 will then contact all parties to notify the parties on your behalf, that you will be partaking in a 1031 exchange. Affilaited 1031 will then request documents from the closing agent in order to prepare our 1031 Exchange documents in a timely manner for closing. Once a closing date has been established, Affilaited 1031 will then contact all parties, including the closing agent, with our documents and instructions on how to execute the documents and prepare the closing statement. As the Qualified Intermediary for the Exchanger, Affilaited 1031 must be a party to the closing statement and must sign the closing statement. Once the closing has been completed, the proceeds, will be wired by the closing agent to Affilaited 1031.

Step Two

Commencing on the date of the sale of the Relinquished Property, the Exchanger has 45 days to identify possible replacement property(ies). Identification may occur with a contract for a replacement property, or a simple email with property addresses. There are three types of identification allowed under IRS Section 1031, which the exchanger must only use one of the following identification: The Three Property Rule: The Exchanger may identify up to three properties, without regard to their value

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

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

The most common identification that is used by Exchangers is the Three Property Rule.

Step Three

Acquisition of Replacement Property

Within 180 days from the closing date of the relinquished property, the Exchanger must purchase the Replacement Property which must have been identified in the identification period. Once the Exchanger is under contract for the replacement property, please contact Affiliated 1031 and your Exchange Coordinator so Affiliated 1031 may proceed its due diligence and contact all parties to the transaction.

Upon receipt of the contract for the purchase of the replacement property, the Exchange Coordinator will contact the closing agent and all parties to the transaction to notify them this will be a 1031 exchange. The Exchange Coordinator will then request certain documentation from the closing agent so Affiliated 1031 may prepare the replacement property documentation in a timely manner for closing. Once a closing date has been established, Affiliated 1031 will then contact all parties, including the closing agent, with our documents and instructions on how to execute the documents and prepare the closing statement. As the Qualified Intermediary for the Exchanger, Affiliaed 1031 must be a party to the closing statement and must sign the closing statement. Affiliated 1031 will then wire the applicable exchange proceeds to the closing agent for the purchase and closing of the replacement property(ies).

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 dierence. You must also use all the cash proceeds from the sale on your purchase in order to completely defern 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 dierence.

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