A 1031 exchange gives sellers a vehicle in which to defer capital gain taxes from the sale of real estate. Any 1031 exchange is subject to audit by Internal Revenue Service. We can facilitate 1031’s, however we highly recommend that you employ your attorney and CPA to construct the 1031 exchange on your behalf. Ask your Black & Associates rep for details.

In general, there are several basics to consider:

• You can't touch the sale proceeds with an exchange. Instead, all proceeds go to an escrow fund maintained by the escrow agent.

• You have 45 days from settlement to "identify" replacement properties.

• You can "identify" up to three properties at fair market value or you can identify more properties if the total value of the identified properties meet certain criteria. Ask your accountant about those criteria.

• There must be an actual purchase, generally within 180 days after the original property was transferred. However, other deadlines can come into play -- speak with an attorney for details.

• The replacement property cannot be real estate for your personal use (residence). Instead, it must be property held for investment.

• An exchange may not produce total tax deferrals. If the adjusted value of the replacement property is less than the adjusted value of the relinquished property, then there may be taxable profits.

• Hang on to all records. A tax exchange defers taxes, it does not eliminate them. You could need settlement papers 20 or 30 years from now to determine profits and taxes, reason enough to retain such documents.

• As always in such matters, do nothing without first getting advice from a real estate attorney or a tax professional. Be sure to review IRS Form 8824, Like-Kind Exchanges (PDF).

Below are a few sites that offer more detailed information. However for reliable information always contact your attorney and accountant.
https://www.1031cpas.com/1ten31Exchanges/3.50ten31ExchangeManual.htm
http://www.1031.org/
http://www.1031invest.com/faq.html