While there is some flexibility when structuring a like-kind exchange, some important requirements must be met. A mistake can ruin your exchange. Here’s what not to do:

1. Miss the 45-Day Identification Deadline: Upon closing on relinquished property, you have 45 days to identify in writing what you intend to acquire in the exchange.

2. Fail to Clearly Identify What You Are Going to Buy: Potential replacement property must be described unambiguously, which generally means a legal description or street address and, for a tenancy-in-common interest, the percentage interest you will be acquiring.  

3. Miss the 180-Day Deadline: You must acquire (close or transfer) all replacement property(ies) by the 180^th day. But, if closing occurs towards the end of a tax year, you must complete your 1031 exchange before filing your income tax return, or request an extension.

4. Close Before You Sign Exchange Documents: At or before the relinquished property closing, the taxpayer must sign an Exchange Agreement and Assignment Agreement, and the taxpayer must notify all contract parties in writing of the assignment to a qualified intermediary.

5. Taking Possession of Your Exchange Funds: The taxpayer cannot have possession, or control, of relinquished sale proceeds. Upon closing, funds are transferred directly to the qualified intermediary exchange account.  

Paying attention to these important issues will eliminate most reasons that exchanges can fail.  

Bill Lopriore is the northeast regional manager and counsel for First American Exchange Company, LLC.

First American Exchange Company, LLC, a Qualified Intermediary, is not a financial or real estate broker, agent or salesperson, and is precluded from giving financial, real estate, tax or legal advice. Consult with your financial, real estate, tax or legal advisor about your specific circumstances.

Nothing contained in this article is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This article is intended for educational and informational purposes only. The views and opinions expressed in this article are solely those of this author, and do not necessarily reflect the views, opinions, or policies of this author’s employer, First American Exchange Company, LLC.