1. Real Property Use.
Both the old and new properties must qualify for investment or business use. If both these properties pass this test, any type of real estate exchange can be carried out.

2. 45 Day Identification Period.
All suitable replacement properties should be identified within 45 days of selling the relinquished property. This 45 day rule of 1031 Rules is very strict and is not extendable even if the 45th day falls on a Saturday, Sunday or a legal holiday.

3. 180 Day Exchange Period.
The replacement property must be acquired by the taxpayer within 180 days after the date on which the taxpayer transfers the property relinquished. Again, there are no exceptions to this deadline, if the 180th day falls on a Saturday, Sunday or a legal holiday.

4. Qualified Intermediary (QI).
QI in the real estate industry is often referred to as an Exchange Accommodator or Facilitator who handles tax-deferred like-kind exchange transaction(s). QI is responsible for a number of important elements in the completion of a successful tax-deferred like-kind exchange transaction.

However, a QI is responsible for:
» Preparation of proper documents for the exchange transaction.
» Receiving, holding and safeguarding the exchange funds throughout the transaction.
» Advising or consulting the individual or his professional advisor(s).

5. Proper Title Holding.
The ‘Title’ to the new property must be exactly the same to the property that has been relinquished.

6. Re-investment Requirement.
To defer all capital gain taxes, it is necessary to buy a property equal or higher in value than the one that has been sold. It is also necessary to re-invest all of the cash proceeds received from the sale.

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