Parts I And II Of The 1031 Exchange Form Explained
The 1031 exchange form can be found on various 1031 exchange companies websites or can be requested of the government. The 1031 exchange form is basically a letter that answers necessary questions about the properties and informs all necessary parties and personnel that such a 1031 trade is partaking and ensures that proper taxation processes are followed. This 1031 exchange form is three parts with parts 1 and 2 explained below. Form parts one and two are the explanation parts of the 1031 exchange form in regards to the purchase of the property and the identification of the parties involved in the 1031 exchange.
The first part of the 1031 exchange form is the legal description of the property that is being given up. This should include the common location, the name if applicable, the size of the lot, the size of the building, and the type of building that is being exchanged. This should be in legal format, not personal format. This means that it should read as a legal paper, not as a letter to an individual. The next step is to describe, in the same manner as before, the property being received. This is not to mean that the property has to be the same type or of the same value, but that the description should be in a legal/formal format.
The next part of the 1031 exchange form has to do with the purchase and relinquish dates. This should include the month, date and year that the property was given up, the month, date and year that the property was actually received by the purchaser. Once the dates for the relinquished property are established, the dates for the acquired property need to be laid out, including the date that the 45 day notice was sent out and the date that the like kind property was received. This should be in the same format at the dates used to illustrate the sold property.
Once the dates are explained, there are questions as to whom the properties were sold to and bought from. If the properties were obtained from a relative, then section II must be completed which is the identification of the related party and how they are related to the purchaser/seller. This is to ensure that the taxes are being fairly handled and that it is not the same immediate family selling and purchasing property while not relinquishing the property.
If either of the properties is sold within two years of the final sale, then part III of the 1031 exchange form must be filled out and taxes must be paid on such sales. If the property has not been sold and it is the year of the sale, then part III of the 1031 exchange form must be filled out. If the property is not sold after two years and this is not the year of the property exchange, then the rest of the form can be ignored. This is a summery of parts 1 and 2 of the 1031 exchange form.
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