What you need to know about Forward Exchanges...

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These are also known as: Non-Simultaneous Exchange and Deferred Exchanges

In a non-simultaneous exchange, the sale of the relinquished property and the acquisition of the replacement property occur at different times. 

In the following structure chart, the Seller is engaging in a 1031 exchange with the assistance of a QI. The steps involved in a non-simultaneous exchange may vary, but they typically follow a similar pattern:

•       Step 1: The Seller transfers the relinquished property to the Purchaser.

•       Step 2: The Seller and the QI enter into a Qualified Intermediary Exchange Agreement (QIEA), where the QI agrees to:

•       hold the cash or proceeds from the sale of the relinquished property; and

•       transfer those funds to the Third-Party Seller for the transfer of the replacement property to the Seller.

•       A QIEA is used to avoid constructive receipt issues because the exchange will fail if the Seller has control over both the funds and the property.

•       Step 3: The Purchaser transfers the cash or proceeds for the purchase of the relinquished property to the QI.

•       Step 4: The Third-Party Seller conveys the replacement property to the Seller.

•       Step 5: The QI transfers the cash or proceeds from the sale of the relinquished property to the Third-Party Seller for the purchase of the replacement property.

 

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The contents herein are intended to convey general information only and not to provide legal or tax advice.  You are advised to contact your legal or tax advisor for specific advice on 1031 exchanges.  No action should be taken in reliance on the information contained herein and we disclaim all liability in respect to actions taken or not taken based on any or all of the contents herein to the fullest extent permitted by law.