One of the major rules in 1031 tax exchange is that the name of the tax payer must appear on the property of which it will be used for identification. The reason being that he is the one who has all the legal documents that are required to verify the property including title deed. As a matter of fact he will be the one to control the property. In this we also have a single member liability company which can also act on the capacity of the member or collude with the member to purchase the property in their individual name.
We also have replacement rule which is also part of 1031 exchange. One thing with the replacement rule is that it is only functional within one hundred and eighty days after closing of the first property. After closing of the first property and the extension of the exchangers return the first property is suppose to be sold and exchanged with the second property.
Apart from that post closing of the first property can be done within a period of 45 days. You can use this period to identify either the accommodator or closing the entity address of the likely replacement of the first property. You should also note that the property will still be submitted for the purchase in situation when the replacement is packed. In some cases the three properties are identified regardless of their value commonly known as three party rule. On the other hand, we also have two hundred percent rule which can identify four or more property as long as the transaction does not pass two hundred percent of the property that has been sold. Ninety-five percent exemption rule is different from this since it gives an allowance of ninety-five percent only if the property sold exceeds two hundred percent.
You can as well talk of trading up. This is a little bit challenging since it requires the net market value and the equity of the property must be equivalent or greater than the replacement property to push forward one hundred percent of the tax on the difference. That difference is important since it determines the tax to be paid. The difference is seen to the sense that additional equity can offset debts and vice versa is not true.
The necessities in 1031 exchange cannot be determined immediately due to the fact that there is no hold time. For instance, they can determine whether the property was acquired immediately before the exchange and many other additional supporting facts.
In addition, you should also note that you cannot use 1031 exchange for personal use but only for investments or business property. Meaning that you cannot swap your primary residence for another home.