The Starker Exchange, IRS code 1031, has a precise set of rules to defer tax on your gain. This program will also bennefit you for deversification purposes.

Stages of a 1031 Tax Deferred Exchange
Sale of Reliquised Property (Phase I)

Contract Stage:
1. List property to be sold.
2. Sign offer to create a contract. I will make certain the appropriate wording is included in the contract.
Closing Stage:
1. Notify Qualified Intermediary (QI) and provide them with necessary information.
2. The QI will contact the title company and prepare the Exchange Agreement.
3. Original Exchange Agreement will be forwarded to the intermediary and copies sent to you for your review.
4. The title company will obtain signatures on the Exchange Agreement and other documents.
5. The title passes to the new owner and the remaining funds are wired into the Qualified Exchange Account.

Identification Stage

1. You will have 45 days from the closing of the relinquished property to identify the replacement property.
2. For an exchange to be 100% tax deferred, you must acquire replacement property that is of equal or greater value and spend all of the net proceeds from the relinquished property.

Purchase of Replacement Property (Phase II)

Contract Stage:
1. Present offer for seller to ratify into a contract.
2. Open the purchase escrow.
Closing Stage:
1. The QI will contact the title company and prepare the Addenda to the Exchange Agreement then the Withdrawal Authorization.
2. The original Addenda and Withdrawal Authorization will be delivered to the QI
3. Copies will be forwarded to you for your review.
4. The title company will obtain signatures.
5. After all documents have been signed and the QI has received the Withdrawal Authorization, the exchange funds will be wired to the title company
6. The transaction is declared closed!


There are also rules for converting an investment property into a residence for future sale to take advantage of IRS tax code 121 which allows for an untaxed gain up to $250,000 per person.

This information is not intended to replace qualified legal or tax counsel.