Rental Property
Single-family rentals, apartment buildings and other property held to produce rental income.
FLORIDA 1031 EXCHANGE CLOSING SERVICES
Plan Your 1031 Exchange Before the Property Is Sold
Coordinate your Florida title and closing services with an independent qualified intermediary, attorney and tax professional before the relinquished property closes.
Section 1031 exchanges involve strict deadlines, specialized documentation and separate professional roles. The Closing Agent provides title, escrow and settlement services for relinquished and replacement properties while coordinating with the professionals responsible for the exchange structure.
A TAX-DEFERRAL STRATEGY
What Is a Section 1031 Exchange?
Section 1031 of the Internal Revenue Code may allow an owner to defer recognition of certain federal gains when qualifying real property held for business or investment is exchanged for other qualifying real property.
When properly structured, the tax basis from the relinquished property generally carries into the replacement property. The transaction is usually a tax-deferral strategy—not an automatic or permanent elimination of tax.
The exchange must also be reported to the IRS on Form 8824 for the applicable tax year.
START BEFORE CLOSING
The Exchange Should Be Structured Before the Property Is Sold
A taxpayer should not wait until the sale proceeds have already been received.
In a typical delayed exchange, the exchange agreement and qualified-intermediary arrangement should be completed before the relinquished-property closing.
If the taxpayer or a disqualified party receives or controls the sale proceeds, the transaction may no longer qualify for the intended deferral.
PROPERTY ELIGIBILITY
Property That May Qualify
Qualifying real property generally must be held for investment, productive use in a trade or business or another eligible business purpose.
Commercial Property
Office, retail, industrial, warehouse and other business or investment real estate.
Investment Land
Vacant land, agricultural property and parcels held for investment rather than immediate resale.
Development Property
Certain development or investment parcels may qualify depending on the taxpayer’s intent and use.
Leasehold Interests
Certain long-term leasehold interests may qualify when the federal requirements are met.
Out-of-State U.S. Property
Qualifying real estate in one U.S. state may generally be exchanged for qualifying real estate in another.
STRICT FEDERAL DEADLINES
The 45-Day and 180-Day Rules
The periods run concurrently. The 180-day period does not begin after the 45-day identification period ends.
45
CALENDAR DAYS
Identify Replacement Property
Potential replacement property generally must be clearly identified in writing within 45 calendar days after the relinquished-property transfer.
180
CALENDAR DAYS
Complete the Replacement Purchase
The replacement property generally must be acquired by the earlier of 180 calendar days after the transfer or the applicable federal tax-return due date, including extensions.
Important: These deadlines are generally strict. A
weekend or holiday does not ordinarily extend the period unless special
federal relief applies.
IDENTIFYING REPLACEMENT PROPERTY
The Identification Must Be Clear and Timely
Replacement property generally must be identified in writing before the identification period expires.
A qualified intermediary, attorney or tax adviser should help the taxpayer evaluate which identification method is appropriate.
Three-Property Rule
The taxpayer may identify up to three potential replacement properties regardless of their combined value.
200% Rule
More than three properties may be identified when their combined fair market value does not exceed 200% of the relinquished property’s value.
95% Rule
In limited cases, a taxpayer identifying beyond the usual limits may qualify by acquiring at least 95% of the total identified value.
THE QUALIFIED INTERMEDIARY
What Does a Qualified Intermediary Do?
A qualified intermediary, commonly called a QI, is an independent party that facilitates the exchange under a separate written exchange agreement.
The QI should generally be selected before the relinquished-property closing.
Request a QI Introduction
✓
Enters into the exchange agreement before closing
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Receives assignment of certain contract rights
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Receives and holds the exchange proceeds
✓
Documents the replacement-property identification
✓
Transfers funds for the replacement purchase
✓
Maintains the exchange records and documentation
THE CLOSING AGENT’S ROLE
Title, Escrow and Settlement Services
The Closing Agent is a Florida title insurance agency and settlement company. We do not determine tax eligibility and do not automatically serve as the qualified intermediary.
Our team coordinates the real estate closing based on the written instructions provided by the taxpayer, QI and authorized advisers.
Title Search and Examination
Review public records and identify title requirements affecting the relinquished or replacement property.
Title Clearance
Coordinate payoffs, releases and other applicable title requirements.
Closing Coordination
Work with the parties, QI, attorneys, lenders and transaction professionals.
Settlement Statements
Prepare closing figures that reflect the approved exchange instructions.
Funding and Disbursement
Receive and disburse closing funds according to authorized written directions.
Recording and Title Insurance
Record applicable documents and issue title insurance after closing requirements are satisfied.
SEPARATE PROFESSIONAL RESPONSIBILITIES
No Single Role Replaces the Others
A properly coordinated exchange commonly involves several independent professionals.
Qualified Intermediary
Administers the exchange agreement, holds proceeds and handles the exchange mechanics.
The Closing Agent
Provides title insurance, escrow and settlement services for the real estate closing.
Attorney
Advises on contracts, ownership, entities, legal structure and transaction-specific risk.
CPA or Tax Adviser
Evaluates tax eligibility, gain, basis, depreciation recapture and reporting requirements.
COMMON EXCHANGE STRUCTURES
Types of 1031 Exchange Transactions
The appropriate structure should be selected with guidance from the taxpayer’s QI, attorney and tax professional.
Delayed Exchange
The relinquished property closes first, followed by acquisition of replacement property within the federal deadlines.
Simultaneous Exchange
The relinquished and replacement properties transfer on or near the same date.
Reverse Exchange
Replacement property is acquired before the relinquished property is sold, commonly through a specialized parking arrangement.
Improvement Exchange
Exchange funds are used for qualifying improvements before the taxpayer receives the replacement property.
REINVESTMENT, DEBT AND BOOT
A Partial Exchange May Create Current Taxable Gain
A fully deferred exchange commonly requires the taxpayer to acquire qualifying replacement property, reinvest the net exchange proceeds and replace the value of debt relieved with new debt or additional cash.
Cash or other non-like-kind value retained by the taxpayer is commonly called boot and may result in current gain recognition.
Receiving boot does not necessarily invalidate the entire exchange, but the taxpayer’s CPA should calculate the consequences.
OWNERSHIP AND TAXPAYER CONSISTENCY
Review Vesting Before Contracts Are Signed
The taxpayer disposing of the relinquished property generally should be the same taxpayer acquiring the replacement property.
Last-minute ownership or entity changes can create title, exchange and tax concerns.
Individuals
Married Couples
Partnerships
Limited Liability Companies
Corporations
Trusts
Disregarded Entities
Related Parties
SPECIAL CONSIDERATIONS
Transactions That Require Additional Review
Related-Party Exchanges
Related-party transactions may involve additional reporting, holding-period and disposition concerns.
Vacation and Mixed-Use Property
Rental history, personal-use days, owner intent and property use may affect eligibility.
Foreign Property
U.S. real property generally is not treated as like-kind to property located outside the United States.
FIRPTA and Withholding
Foreign-owner withholding and reporting obligations may still apply to the Florida sale.
Entity Changes
Changes involving LLCs, partnerships, corporations or trusts should be reviewed before closing.
State Tax Consequences
State-level treatment may differ depending on the relinquished and replacement-property locations.
A TYPICAL DELAYED EXCHANGE
From Sale Planning to Tax Reporting
Assemble the Advisory Team
Consult the QI, CPA, attorney and closing company before the relinquished property closes.
Sign the Exchange Agreement
Establish the exchange with the QI before receiving or controlling the sale proceeds.
Close the Relinquished Property
The closing company transfers exchange funds according to the approved written instructions.
Identify Replacement Property
Complete the written identification within 45 calendar days.
Complete Due Diligence
Review title, survey, condition, financing, ownership and tax considerations.
Acquire the Replacement Property
Complete the replacement closing within the applicable federal exchange period.
Report the Exchange
File Form 8824 and complete all other required federal and state tax reporting.
PREPARE BEFORE CONTACTING THE TEAM
Information That Helps Begin the Coordination Process
Having the basic transaction and ownership information available will help the closing and advisory teams identify next steps.
Do not send Social Security numbers, tax identification numbers or other sensitive information through ordinary unsecured email unless specifically directed through an approved secure channel.
COMMON MISTAKES TO AVOID
Small Timing or Structure Errors Can Have Major Consequences
Waiting until closing day to contact a QI
Receiving or controlling the sale proceeds
Missing the 45-day identification deadline
Missing the 180-day acquisition deadline
Assuming a primary residence qualifies
Identifying replacement property imprecisely
Changing taxpayers or vesting without review
Ignoring potential taxable boot
Overlooking depreciation recapture
Using proceeds for non-exchange purposes
Treating the title company as the tax adviser
Failing to report the exchange on Form 8824
SEPARATE LEGAL SUPPORT
Legal Services Are Provided Separately
The Closing Agent is a title insurance agency and settlement company, not a law firm.
When legal assistance is needed, we may help facilitate an introduction to Barry Miller Law, a separate Florida law firm with which we work regularly, or the taxpayer may select another attorney.
Legal services are subject to conflict review, acceptance of the matter and a separate written engagement agreement.
Visit Barry Miller LawContract Review
Review exchange-related contract terms, assignments and transaction obligations.
Ownership Structure
Evaluate trusts, entities, vesting and taxpayer-consistency concerns.
Complex Exchanges
Legal support for reverse, improvement, related-party and other specialized transactions.
Transaction Risk
Advice concerning legal obligations, disputes and transaction- specific concerns.
FREQUENTLY ASKED QUESTIONS
Florida 1031 Exchange Questions
Does a 1031 exchange eliminate capital-gains tax?
Not necessarily. A qualifying exchange generally defers recognition of gain by carrying the basis into the replacement property. A later taxable disposition may cause the deferred gain to be recognized.
Can I use a 1031 exchange for my primary home?
A primary residence held for personal use generally does not qualify under Section 1031. Other tax provisions may apply to the sale of a principal residence.
Must the relinquished and replacement properties be the same type?
Not necessarily. Qualifying U.S. real property is broadly treated as like-kind to other qualifying U.S. real property. Eligibility still depends on the taxpayer’s ownership and use.
Can I receive the proceeds and then send them to a QI?
Receiving or controlling the proceeds may prevent the intended exchange treatment. The QI arrangement generally should be established before the relinquished-property closing.
Can I identify or purchase more than one replacement property?
Potentially, yes, subject to the federal identification rules and the taxpayer’s exchange strategy.
Can I purchase a less expensive replacement property?
Potentially, but retained cash, reduced debt or other non-like-kind value may create taxable boot.
Does The Closing Agent serve as my qualified intermediary?
The Closing Agent provides title, escrow and settlement services. Any qualified-intermediary engagement should be separately confirmed in writing with an eligible QI provider.
Does The Closing Agent provide tax advice?
No. Tax eligibility, basis, gain, depreciation recapture and reporting should be addressed by the taxpayer’s CPA or tax adviser.
Can Barry Miller Law provide legal assistance?
Potentially, subject to conflict review, acceptance of the matter and completion of a separate written engagement agreement.
BEGIN BEFORE THE SALE CLOSES
Coordinate the Exchange Team Before the Proceeds Are Released
Advance planning helps ensure that the title, exchange, legal and tax roles are properly established before the relinquished-property closing.
Important Tax and Legal Notice
The Closing Agent is a Florida title insurance agency and settlement company. It is not a law firm, accounting firm, qualified intermediary or tax-advisory firm unless a separate written agreement expressly provides otherwise.
The Closing Agent does not determine whether a taxpayer, property or transaction qualifies for Section 1031 treatment and does not provide tax, accounting or legal advice.
Qualified-intermediary services are provided under a separate written agreement with the selected QI provider.
Legal services are provided separately by Barry Miller Law or another attorney selected by the taxpayer and are subject to conflict review and a separate attorney-client engagement.
Taxpayers should consult their own CPA, tax adviser and attorney before relying on any deadline, identification method, ownership structure, reinvestment calculation or potential tax consequence.
Tax laws, regulations and administrative guidance may change. The information on this page is general and should not be relied upon as a substitute for transaction-specific professional advice.