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Real Estate Investor - A 1031 Exchange Is Not A Total Commitment

By: Trisha Coppley

The Section 1031 exchange process is one that is best begun with a certain amount of pre-planning and thought; the process contains ample opportunity for the incautious property investor for costly errors. Keeping this in mind, you might be hesitant to begin the 1031 exchange process without being sure that you'll be able to follow the process to completion. In all actuality, however, the risks involved in an exchange aren't as intimidating as they might, at first, appear.

Starting a 1031 exchange is not by any means a total commitment – in all actuality, many of the smartest investors, when selling an investment property will start the process of a 1031 exchange simply for the purpose of keeping their options open. This is because, if one begins on the path of a exchange, there exist several opportunities to back out and sell the property outright, while beginning with the intention of selling outright removes altogether the option of a 1031 tax exchange.

There is actually no reason to be afraid of the possibility of changing your mind during the course of an exchange. All you really need to do in order to keep your options open is to stay attentive to the time frames involved in the process of an exchange, as they will come to bear on when you'll get the chance to receive the money that would've been put towards your replacement property had you elected to go through with the exchange.

After you close the sale of your relinquished property, the proceeds of the sale are sent directly to your chosen intermediary. Once this has occurred, the the first opportunity you will have to retrieve your money from the qualified intermediary is after a period of 45 days, by which point you are supposed to have identified a suitable replacement property. If this deadline arrives without your having made an identification, the exchange will be terminated and you'll be able to receive your proceeds. If you've made an identification before deciding that you don't want to go through with the exchange, simply revoke that identification before the 45 days have passed, and the exchange will end.

If you are past this stage of the process, the next chance you will get to retrieve your proceeds will be after another 180 days, which is the deadline for closing on the purchase of a replacement property. However, if your tax return occurs during the 180 days, you can shorten this waiting period. As long as you don't ask for an extension on your return, you are able at this point to inform your qualified intermediary that the exchange is over and receive your {money.

In the end, it's always a good idea to be prepared for any circumstances that might arise; beginning the 1031 process when you're unsure what will happen in the future can, in fact, be advantageous, in that it keeps both options available. Provided that you take note of the time frames involved in the 1031 exchange process, you can have the freedom to back out of the exchange if your circumstances change.

Article Source: http://articles.directorygold.com

Many Types Of Investment Property Qualify For A 1031 Tax Exchange. Be Sure To Consult With An Expert That Offers 1031 Exchange Services To Maximize Your Tax Savings. More Information Is Available At www.Top1031Exchange.com

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