How 1031 Exchange Works

Plan A head & Choose a Qualified Intermediary

A successful 1031 exchange in Shelby, MT begins before you sell your property. If you don’t structure the sale properly, you could lose your tax deferral.

• Confirm Property Eligibility: The property in Shelby, MT must be held for business or investment purposes. Primary residences do not qualify.
• Hire a Qualified Intermediary (QI): The IRS requires that a neutral third party, known as a QI, handles the exchange funds and documentation in Shelby, MT.
• Understand the IRS Deadlines: You have 45 days to identify a replacement property in Shelby, MT and 180 days to complete the purchase.

At 1031 Taxology, we serve as your Qualified Intermediary, ensuring every step is IRS-compliant.

Sell Your Investment Property

After listing and selling your investment property in Shelby, MT, you must follow strict IRS rules to qualify for a 1031 exchange:

• Funds Must Be Held by a Qualified Intermediary: You cannot take possession of the sale proceeds. If you do, your exchange is disqualified, and capital gains taxes are due immediately.
• Your Sales Contract Must Include a 1031 Exchange Clause: This ensures buyers in Shelby, MT are aware of the exchange and that it remains legally compliant.
• All Documents Must Be Structured Properly: We handle all legal paperwork and escrow coordination to ensure compliance.

Once your sale in Shelby, MT is complete, 1031 Taxology holds your funds in a segregated, FDIC-insured account, ensuring your money is safe while you search for a replacement property.

Identify a Replacement Property (Within 45 Days)

After selling your property in Shelby, MT, the IRS gives you 45 days

You may choose from these three identification rules:

• Three-Property Rule: Identify up to three properties of any value.
• 200% Rule: Identify more than three properties in Shelby, MT, as long as their combined value does not exceed 200% of the relinquished property’s sale price.
• 95% Rule: Identify an unlimited number of properties, but you must purchase at least 95% of the total value.

Your list must be submitted in writing to 1031 Taxology by midnight of the 45th day—no exceptions.

Purchase the Replacement Property (Within 180 Days)

From the day you sell your property in Shelby, MT, you have 180 days to finalize the purchase of your replacement property.

• Assign Your Purchase Contract to Your Qualified Intermediary: This ensures the exchange remains compliant.
• Meet IRS Value Requirements: The replacement property in Shelby, MT must be equal to or greater in value than your relinquished property to defer all taxes.
• Direct Funds Transfer: 1031 Taxology will securely transfer funds to complete the purchase on your behalf.

Finalize the Exchange & Defer Your Taxes

Once your replacement property closes, your capital gains tax remains deferred, allowing you to reinvest more money into new real estate opportunities.

• Tax deferral remains in effect Tuntil you decide to sell your new property in Shelby, MT without reinvesting.
• Many investors repeat the process, continuously growing their portfolios while deferring taxes.
• Heirs may inherit the property with a stepped-up tax basis, eliminating deferred taxes entirely.