Popular Misconceptions

  1. Fiction. You need to find someone to trade with.

    2. Fact. In only about 2% of exchange transactions are two owners actually trading anything! The other 98% are delayed exchanges through a qualified intermediary.

  2. Fiction. You just go out and buy property within two years.

    3. Fact. This ONLY works with principal residences. Business and investment property requires a different set of rules.

  3. Fiction. I will talk to my accountant about how to do it after I have completed the exchange.

    4. Fact. Too late - documents need to be prepared BEFORE THE SALE! The Texas 1031 Exchange Company prepares documents for you, your attorney's and accountant's review.

  4. Fiction. To have a like-kind property, you can only exchange a ranch for a ranch or apartments for apartments.

    5. Fact. Property like-kind to real estate is any other real estate. For example, you can exchange an office building for a golf course.

  5. Fiction. I don't have to be concerned about the IRS regulations because: a.) the IRS auditor will sense that I have pure intentions, and they can see I am an honest person. After all, the IRS just wants what is fair!

    6. Fact. It is adherence to the regulations that count - not your good intentions.

    Fiction. b.) I am logical enough to figure out how to do this on my own and don't want to waste money paying someone else for common sense.

    Fact. The regulations reflect congressional intent, not logic or common sense.

  6. Fiction. All you have to reinvest is the profit in your relinquished property.

    7. Fact. No. You need to invest your sale proceeds and not receive "boot".

  7. Fiction. You can make repairs after you acquire your replacement property, and it will count as part of your exchange.

    8. Fact. Repairs made after you take title do not count as part of the value of the replacement property. The Texas 1031 Exchange Company can assist you in inclusion of construction in the exchange.

  8. Fiction. If I extend seller financing with my relinquished property, I only pay tax on my gross profit percentage when I receive payments like an installment sale.

    9. Fact. No. In all likelihood you pay tax on the full note you receive.

  9. Fiction. The tax free exchange is too complicated; it is better to just pay the tax.

Fact. The exchange transaction is only complicated when you work with an inexperienced person. The documents usually can be prepared and delivered to the Title Company the same day that The Texas 1031 Exchange Company receives your sales contract.