Speak With a Specialist

Important Notice to 1031 Exchange Clients (Exchangors)

Important Notice to 1031 Exchangors

Investors that plan to complete any type of 1031 exchange transaction, including a forward, reverse, improvement, leasehold improvement, foreign property or zero equity 1031 exchange, should carefully read the following important information.

Obtain Advice from Advisors

Tax-deferred exchange transactions are complex tax planning strategies.  Investors, often referred to as exchangors, should only enter into a 1031 exchange with the expert advice and guidance of their professional legal, tax, and financial advisors.  Exchangors should always consult with their advisors well before starting a like-kind exchange to ensure they are making the best possible decisions for their specific situation.

Set-up 1031 Exchange Before Any Closings

Exchangors must always set-up their 1031 exchange with a qualified intermediary, often referred to as an accommodator or facilitator, before they close on the sale of their relinquished property or they close on the purchase of any of their 1031 replacement properties.  A best practices qualified intermediary, like Exeter 1031 Exchange Services, LLC (Exeter1031™), will ensure that all 1031 documents and related transaction forms are completed, signed and ready for closing.  If the tax-deferred exchange is not in place prior to any closing, the transaction will not qualify for tax-deferred treatment under Section 1031 of the Internal Revenue Code (i.e., it will be a taxable transaction at that point). 

Exeter1031™ Does Not Provide Legal or Tax Advice

Exeter1031™ will work closely with the investor and their professional advisors in structuring the best 1031 exchange strategy to meet their goals and objectives.  However, Exeter1031™ cannot and does not provide any legal, tax, and/or financial advice.

1031 Exchange Funds Investment Policy and Disclosure Statement

Exeter 1031 Exchange Services, LLC takes its fiduciary responsibilities and its duty of care extremely seriously, especially when it comes to receiving, holding, managing, and safeguarding its exchangors’ 1031 Exchange funds. Exeter1031™ is one of the few qualified intermediaries that publishes its 1031 Exchange Funds Investment Policy and Disclosure Statement.

Notifications to Exeter 1031 Exchange Services, LLC

Exchangors should notify their 1031 specialist at Exeter 1031 Exchange Services, LLC immediately if any of the following circumstances apply–or may apply–to their specific tax-deferred like-kind exchange transaction:

  • The investor intends to withdraw cash (equity) from their tax-deferred exchange transaction before, during or after they complete their exchange.
  • The exchangor intends to request a refund of their earnest money deposit (EMD) previously deposited with their closing or settlement agent with non-exchange funds or out-of-pocket funds toward the purchase of their replacement property. 
  • The investor intends to build or construct capital improvements on the like-kind replacement property as part of their like-kind exchange. 
  • The exchangor will accept and either include or exclude a seller carry back note (seller financing) as part of their 1031 exchange transaction.
  • The investor is a non-California resident selling California real property (California withholding may apply).
  • The exchangor is a foreign person selling U.S. real estate (FIRPTA withholding may apply).
  • The investor’s transaction is an improvement (build-to-suit or construction) tax-deferred like-kind exchange that will include making capital improvements to their replacement property.
  • The exchangor’s transaction is a reverse exchange where they are closing on the purchase of their replacement property before they are closing on the sale of their relinquished property. 
  • The investor’s 1031 exchange transaction includes personal property (i.e., non-real property) as part of their tax-deferred exchange.
  • The exchangor finds a discrepancy, error or omission in any of their transactional documents.

Exchangors Are Responsible for Monitoring Time Lines

Investors are solely and absolutely responsible for monitoring, tracking and complying with their required tax-deferred exchange deadlines as outlined in Section 1031 of the Internal Revenue Code (IRC) and Section 1.1031 of the Treasury Regulations.  These due dates are briefly summarized below:

Identifying one or more replacement properties within 45 calendar days from the closing date (transfer of ownership) of the relinquished property.  

Acquiring all intended replacement properties on or before the earlier of:

  • 180-calendar days from the closing date (transfer of ownership) of the relinquished property; or
  • The due date of the exchangor’s federal income tax return for the year in which the relinquished property closing date occurs, including extensions.

IRS Restrictions on 1031 Exchange Funds

The Internal Revenue Service has also placed certain restrictions on investors’ rights to receive, pledge, borrow, or otherwise obtain the benefits from their 1031 exchange funds pursuant to Section 1.1031(k)-(g) of the Treasury Regulations while their funds are being held and safeguarded by Exeter1031™ as the qualified intermediary. 

Generally, investors can access their 1031 exchange funds (and the qualified intermediary may release the 1031 funds) if:

  • Their 45-calendar day identification period has passed, and they have not identified any replacement properties (i.e., 1031 funds can’t be released until after the 45th calendar day);
  • They have acquired all the intended replacement properties to which they are entitled, and their 45-calendar day identification period has expired and some 1031 money remains; or
  • The investor’s 180-calendar day exchange period has expired (i.e., 1031 funds can’t be released until after the 181st calendar day).

Exeter 1031 Exchange Services, LLC is always available to answer any questions investors or their advisors may have.  Simply contact one of our regional office locations and speak to a 1031 specialist for assistance.

State of Washington Required Notice

Washington state law, RCW 19.310.040, requires an exchange facilitator to either maintain a fidelity bond in an amount of not less than one million dollars that protects clients against losses caused by criminal acts of the exchange facilitator, or to hold all client funds in a qualified escrow account or qualified trust that requires your consent for withdrawals. All exchange funds must be deposited in a separately identified account using your taxpayer identification number. You must receive written notification of how your exchange funds have been deposited. Your exchange facilitator is required to provide you with written directions of how to independently verify the deposit of the exchange funds. Exchange facilitation services are not regulated by any agency of the state of Washington or of the United States government. It is your responsibility to determine that your exchange funds will be held in a safe manner.