How it Works

IRS 1031 ExchangeThe investor planning to take advantage of the tax benefit afforded by Section 1031 markets the property in the usual manner. The investor should instruct its real estate agent to include an “exchange cooperation” provision in the purchase agreement to insure the passive cooperation of the buyer. Seldom do buyers hesitate to pledge their cooperation, especially when assured in writing that their participation in the exchange will not delay closing nor cause them additional expense.

Contact LEX when escrow is first opened or when instructions to the closing agent are to be prepared. LEX will then prepare the appropriate exchange documents and forward exchange instructions to the closing agent or escrow. Exchange documents must be executed prior to the closing. The exchange documents convert the “sale” of your property into an “exchange”.

At the close of escrow, funds derived from the transaction (the exchange proceeds) are deposited directly into custodial accounts to be held for the Exchanger’s benefit. The Exchanger is not permitted to receive the exchange proceeds directly. The proceeds are “controlled” by the LEX in accordance with written terms with the Exchanger.

The Exchanger identifies and contracts to acquire one or more replacement properties within required time limits. LEX assists in documenting compliance with all time requirements.

Acting for the Exchanger, LEX facilitates conversion of the “purchase” to an “exchange,” wires exchange proceeds to escrow or the closing agent and directs that replacement property be deeded to the Exchanger.

LEX takes responsibility for properly documenting all phases of the exchange transaction. LEX also maintains a complete record of the transaction to aid the Exchanger meet all tax filing and audit information requests.