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The 1031 tax exchange process is one that should be entered into with a good deal of thought and pre-planning; it presents the unwary real estate investor with ample opportunity for costly errors. Taking this into consideration, you might be skittish regarding beginning a 1031 exchange without a certainty that you'll be able to follow it to its end. In reality, though, the risks involved in an exchange are not as intimidating as they might, at first glance, appear. Beginning the 1031 process is not by any means a permanent commitment – as a matter of fact, many of the smartest real estate investors who are selling a piece of property will start the 1031 exchange process simply to leave the option of exchanging open. This is because, if one starts out on the path of a 1031 exchange, there exist several opportunities to back out and sell outright, while beginning with the intention of selling outright removes altogether the option of conducting an exchange. There's actually no reason to worry about the possibility of changing your mind during the course of an exchange. The only thing you actually need to do in order to keep your options open is to be aware of the deadlines involved in the exchange process, as they'll be the major determining factor of when you'll get the chance to receive the proceeds that would've been transferred to your 1031 replacement property had you elected to go through with the exchange. After you close the sale of your relinquished property, the proceeds are transferred straight to your intermediary. Once this has occurred, the the first opportunity you will have to take back your proceeds from the intermediary is after a 45 day period, by which point you are supposed to have identified a suitable 1031 replacement property. If 45 days have come and gone without your having made an identification, the exchange will be terminated and you'll be able to receive your proceeds. If you have made an identification before deciding that you would like to opt out of the exchange, simply revoke that identification before the 45 days have passed, and the result will be the same. If you have already completed this step in the 1031 process, the next opportunity to collect your 1031 proceeds will be one-hundred-eighty days from the end of the 45 day period, which is the deadline for closing on a 1031 replacement property. An exception to this rule is that if your federal income tax return occurs during the one-hundred-eighty days, you may shorten this time frame. As long as you do not ask for an extension on your return, you may, at this point, tell your intermediary the exchange is over and receive your {proceeds. In the end, it is always a good idea to be prepared for whatever contingencies might arise; starting the 1031 process when you are not certain what the future may hold can, in fact, be a good way to keep all of your options available. Provided that you take note of the deadlines involved in the 1031 process, you can have the freedom to change your mind regarding the exchange in the event that there is a change in your circumstances.
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About the Author : Professional 1031 Exchange Experts Are Available To Help Investors Maximize Tax Savings By Using A 1031 Starker Exchange. Learn More At www.Top1031Exchange.com
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