The process of a 1031 exchange is one that is best entered into with a certain amount of planning and thought; it presents the unwary real estate investor with ample opportunity to make a misstep. Taking this into consideration, you might be hesitant to begin the 1031 process without a certainty that you will be able to follow it to completion. In reality, though, the perils of beginning the 1031 process do not have to be as intimidating as they might, at first glance, seem.
Beginning the 1031 process is not by any means a total commitment as a matter of fact, many of the smartest property investors, when selling a piece of property will begin the process of a 1031 exchange just to leave the option of exchanging open. This is because, if an investor starts out on the path of a 1031 exchange, there are several opportunities to change one's mind and simply sell the property, while beginning with the intention of selling outright completely surrendering the option of conducting an exchange.
There's no real reason to worry about the possibility of changing your mind in the course of a 1031 exchange. The only thing you really have to do in order to keep your options open is stay attentive to the deadlines involved in the process, as they'll come to bear on when you will have the opportunity to receive the money that would have been transferred to your 1031 replacement property had you chosen to go through with your exchange.
After you close the sale of your relinquished property, the proceeds are transferred directly to your chosen intermediary. Once this has happened, the earliest point at which you can take back your money from your intermediary is after a period of 45 days, in which time you are supposed to have identified a suitable 1031 replacement property. If this deadline arrives and you have not made an identification, the exchange will automatically be terminated and you will be able to receive the money from the initial sale. If you've made an identification before deciding that you would like to terminate your exchange, you can just revoke the identification before the end of the 45 day period, and the exchange will end.
If you've already completed this stage of the 1031 process, the next opportunity you will have to retrieve your 1031 proceeds will be 180 days from the end of the 45 day period, the deadline for closing on your 1031 replacement property. An exception to this rule is that if your tax return occurs during the 180 days, you can shorten this waiting period. As long as you do not ask for an extension on your return, you are able at this point to tell your intermediary that the exchange has been terminated and receive your {money.
At the end of the day, it's always a good idea to be prepared for any circumstances that might arise; beginning a 1031 exchange when you're uncertain what will happen in the future can, in fact, be advantageous, in that it keeps all of your options open. As long as you make sure to stay aware of the deadlines involved in the process, you are at liberty to back out of your exchange in the event that there is a change in your circumstances.
Beginning the 1031 process is not by any means a total commitment as a matter of fact, many of the smartest property investors, when selling a piece of property will begin the process of a 1031 exchange just to leave the option of exchanging open. This is because, if an investor starts out on the path of a 1031 exchange, there are several opportunities to change one's mind and simply sell the property, while beginning with the intention of selling outright completely surrendering the option of conducting an exchange.
There's no real reason to worry about the possibility of changing your mind in the course of a 1031 exchange. The only thing you really have to do in order to keep your options open is stay attentive to the deadlines involved in the process, as they'll come to bear on when you will have the opportunity to receive the money that would have been transferred to your 1031 replacement property had you chosen to go through with your exchange.
After you close the sale of your relinquished property, the proceeds are transferred directly to your chosen intermediary. Once this has happened, the earliest point at which you can take back your money from your intermediary is after a period of 45 days, in which time you are supposed to have identified a suitable 1031 replacement property. If this deadline arrives and you have not made an identification, the exchange will automatically be terminated and you will be able to receive the money from the initial sale. If you've made an identification before deciding that you would like to terminate your exchange, you can just revoke the identification before the end of the 45 day period, and the exchange will end.
If you've already completed this stage of the 1031 process, the next opportunity you will have to retrieve your 1031 proceeds will be 180 days from the end of the 45 day period, the deadline for closing on your 1031 replacement property. An exception to this rule is that if your tax return occurs during the 180 days, you can shorten this waiting period. As long as you do not ask for an extension on your return, you are able at this point to tell your intermediary that the exchange has been terminated and receive your {money.
At the end of the day, it's always a good idea to be prepared for any circumstances that might arise; beginning a 1031 exchange when you're uncertain what will happen in the future can, in fact, be advantageous, in that it keeps all of your options open. As long as you make sure to stay aware of the deadlines involved in the process, you are at liberty to back out of your exchange in the event that there is a change in your circumstances.