Mutual-exchange, LLC - Qualified Safe Harbor Intermediary - 1031 Tax-Deferred Exchange Specialists.
Mutual-exchange, LLC - Qualified Safe Harbor Intermediary - 1031 Tax-Deferred Exchange Specialists.

The Exchange Process

Years ago, exchanges were only a swap of properties between two parties. Today, whether they are delayed, simultaneous (Step #1 and #2 take place at the same time) or reverse (when the replacement property transaction is completed before the time that the relinquished property is ready to close), they usually involve at least four parties: the investor who is doing the exchange, the buyer who is purchasing the investors relinquished property, the seller who is providing the investor with his replacement property and a Qualified Intermediary.

Click here to see a flow chart of The Delayed Exchange

This process requires the use of a Qualified Intermediary whose role is to facilitate your transaction in accordance with IRS codes and rulings. The Qualified Intermediary becomes the fourth party fiduciary in both delayed and simultaneous exchanges. The Qualified Intermediary works to provide "Safe Harbor" protections to prevent actual or constructive receipt of exchange proceeds, which would disqualify the exchange. Mutual-exchange, LLC is a Qualified Safe Harbor Intermediary and suggests the following steps be taken in conjunction with their services (based on a Delayed Exchange):

  1. Contact Mutual-exchange, LLC to discuss your plans and to ensure that your plans will be clearly utilizing an exchange of "like-kind" property.
  2. The investor signs a contract to sell a relinquished property to the buyer. The contract for sale should contain the cooperation clause that would identify this transaction as the first step in the exchange process.
  3. At the closing of the relinquished property, agreements for a Safe Harbor Trust are executed with Mutual-exchange, LLC and the exchange funds are placed into escrow in a FDIC insured institution. The deed will be transferred from the investor to the buyer.
  4. Beginning with, and including, the closing date of the first transaction in this process the investor has 180 days in the exchange period to acquire all replacement properties. Furthermore, within the first 45 days of the 180-day period the investor must outline the identified replacement property in writing to Mutual-exchange, LLC.
  5. The contract for the replacement property must include the cooperation clause.
  6. At the closing of the transaction where the investor gains the replacement property, Mutual-exchange, LLC provides the escrow agent with the exchange funds and the deed is transferred directly to the investor.
  7. Follow up after the exchange is important. The taxpayer should obtain professional help in filling out the IRS Form 8824 for reporting the exchange, and the transfer of basis for the replacement property depreciation schedule if applicable.