An exchangor or exchanger refers to an individual or entity that is selling a property and planning to use the proceeds from that sale to purchase a like-kind property as part of a 1031 exchange.
A 1031 exchange, also known as a like-kind exchange, is a mechanism under U.S. tax law that allows investors to defer paying capital gains taxes on investment property when it is sold, as long as another, “like-kind” property is purchased with the profit gained by the sale of the first property.
The exchangor or exchanger initiates this process with the help of a Qualified Intermediary (QI), also known as an exchange facilitator, who is responsible for ensuring that the exchange complies with all the relevant rules and regulations set out by the IRS. The QI holds the proceeds from the sale of the relinquished property and then uses them to purchase the replacement property, ensuring the exchangor does not take constructive receipt of the funds, which could disqualify the exchange.
It’s important to note that the exchangor or exchanger must identify the replacement property within 45 days of the sale of the relinquished property and must complete the purchase of the replacement property within 180 days of the sale of the relinquished property to successfully complete a 1031 exchange and defer capital gains taxes.