One of the major rules in 1031 tax exchange is that the name of the tax payer must appear on the property of which it will be used for identification. The reason being that he is the one who has all the legal documents that are required to verify the property including title deed. Making him to take full control of the property. In this we also have a single member liability company which can also act on the capacity of the member or collude with the member to purchase the property in their individual name.
Besides, there is also another rule known as replacement rule. You should note that this rule can only operate within one hundred and eighty days after the closing of the first property. After closing of the first property and the extension of the exchangers return the first property is suppose to be sold and exchanged with the second property.
In addition to that another 1031Gateway rule highlights and gives an allowance of 45 days for the post-closing of the first property. Identification of the accommodator and closing of the entity of address of the potential replacement of the first property can be done within this period of 45 days. You should also note that the property will still be submitted for the purchase in situation when the replacement is packed. Three party rules allows for the selection of three property not considering their values. Besides, we also have two hundred percent rule which allows for the identification of four or more property as long as long as it does not pass two hundred percent of what has been sold. Ninety-five percent exemption rule is different from this since it gives an allowance of ninety-five percent only if the property sold exceeds two hundred percent.
You can as well talk of trading up. The first thing is that the net market value and the equity of the property must be equal to or greater than the replacement property to push forward one hundred percent of the tax on the difference. It also requires for the exchange to pay the tax on that difference. The difference is seen to the sense that additional equity can offset debts and vice versa is not true. Get more information here!
Another thing is that 1031 code does not have hold time but they take some time to determine some of the necessities. We can talk of finding out whether the first property was acquired immediately before the exchange time or whether it was acquired after the exchange time not forgetting others as well.
In addition, you should also note that you cannot use 1031 exchange for personal use but only for investments or business property. On that note you will remain in your residence without swapping. Learn more about 1031 exchange at https://www.huffingtonpost.com/phil-jemmett/pros-and-cons-of-a-1031-t_b_4415703.html.