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When May An Exchangor Receive Money From An Exchange?

As a 1031 exchange facilitator, we understand that one of the primary goals of an exchange is to defer taxes on the sale of real estate. When it comes to receiving money from an exchange, an exchangor must be aware of certain rules and regulations.

Firstly, an exchangor cannot receive any cash or other non-like-kind property from the exchange without incurring tax liability. Therefore, the exchangor must identify like-kind replacement property and use all of the net proceeds from the sale of the relinquished property to acquire the replacement property.

Secondly, an exchangor may receive some cash or other non-like-kind property if they meet the requirements of the safe harbor provision under the Section 1031 regulations. The safe harbor allows the exchangor to receive cash or other property as long as they do not receive more than 15% of the total value of the replacement property or more than the actual amount of expenses incurred in the exchange.

Lastly, if an exchangor fails to meet the identification or acquisition requirements of the exchange, the transaction may be disqualified, and the exchangor may be required to pay taxes on the sale of the relinquished property.

At 1031 Exchange Place, we are committed to helping our clients navigate the complexities of a 1031 exchange and ensuring a successful transaction. We encourage our clients to consult with their tax and legal advisors to determine their specific needs and goals when it comes to receiving money from an exchange.