In a 1031 exchange, an exchange agreement is a legal document that outlines the terms and conditions of the exchange between the taxpayer (also known as the “exchanger”) and the qualified intermediary (QI) or accommodator facilitating the transaction. The exchange agreement typically includes information such as the identification of the relinquished property, the identification of the replacement property, and the timeline for completing the exchange.
The exchange agreement is an essential component of a 1031 exchange as it sets out the responsibilities and obligations of the parties involved and helps ensure that the transaction is structured in a way that complies with IRS regulations. In addition to the exchange agreement, other documents, such as a purchase agreement for the replacement property and a deed transferring the relinquished property, may also be required to complete the exchange.
It is important for taxpayers to carefully review and understand the exchange agreement and any related documents before entering into a 1031 exchange to ensure that they fully understand their obligations and responsibilities throughout the transaction.