Real Estate Investors: The 1031 Process Isn't Irreversible

The 1031 tax exchange procedure is one that is best begun with a certain amount of foresight and planning; it contains ample opportunity for the unwary real estate investor to make a misstep. Keeping this in mind, you may be hesitant to begin a 1031 exchange without being sure that you will be able to follow it to its end. In reality, though, the risks involved in an exchange aren't as unmanageable as they may, at first, seem.

Beginning the 1031 process is not in any way a permanent commitment – as a matter of fact, many of the smartest property investors who are selling a piece of property will begin the 1031 exchange process just for the purpose of leaving their options open. This is because, if an investor starts out on the path of a 1031 exchange, there are several opportunities to back out and sell outright, while starting out along the path of selling outright removes altogether the option of conducting an exchange.

There's actually no reason to be afraid of the possibility of having a change of heart during the course of a 1031 tax exchange. The only thing you really have to do in order to keep your options open is be attentive to the deadlines involved in the process of an exchange, as they'll be the major determining factor of when you will get the opportunity to collect the proceeds that would have been put towards your 1031 replacement property had you elected to go through with your exchange.

After closing on the sale of your relinquished property, the proceeds of the sale are sent straight to your qualified intermediary. Once this has happened, the first point at which you can take back your money from the qualified intermediary is at the end of the ensuing forty-five days, which is the deadline for having identified a suitable 1031 replacement property. If forty-five days have come and gone without your having identified a replacement property, the exchange will end and you will be able to collect the money from the initial sale. If you've identified a replacement property before deciding that you do not want to go through with your exchange, you can just revoke the identification before the forty-five days are over, and the exchange will end.

If you're past this step in the 1031 process, the next chance you will get to collect your 1031 proceeds will be one-hundred-eighty days from the end of the forty-five day period, which is the deadline assigned for closing on the purchase of your 1031 replacement property. An exception to this rule is that if your tax return occurs before this deadline, you can shorten this time frame. As long as you do not ask for an extension on your return, you may, at this point, tell your qualified intermediary that the exchange has been terminated and collect your {money.

At the end of the day, it is always a good idea to be prepared for whatever contingencies may arise; starting a 1031 exchange when you're not certain what the future may hold can, in fact, be advantageous, in that it keeps both options available. Provided that you stay aware of the deadlines involved in the 1031 exchange process, you are at liberty to change your mind regarding the exchange in the event that there is a change in your circumstances.

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1031 Qualified Intermediaries Are Specialized Tax Experts That Facilitate The 1031 Deferred Exchange Process For Investors. More Information Is Available At www.Top1031Exchange.com

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