As we all know there are many great ways to use an exchange and defer your capital gains taxes but that is what you hear from people trying to sell you something.
Make sure you are aware that you need to follow these important steps in completing a successful exchange: a) Give yourself plenty of time to identify a replacement property.
The IRS rules are generally 45 days to identify a replacement property and 180 days to close in the property.
Do Not Sell with a short identification window, especially if you have not located a replacement.
b) Do not tell sellers you need to complete an exchange.
This one still confounds me.
I get calls all the time from other brokers or buyers saying "I need to find something to complete and exchange" Let me ask you a question.
How much negotiating leverage do you have if the other person across the table knows your exchange clock is ticking and if you don't buy something soon you will pay a large sum to Uncle Sam? Not a good idea.
There are strategies to use to make sure it is in the offer without telling the seller.
This is important.
You will literally lose thousands of dollars if this is not done correctly.
c) Use possession dates wisely.
Make sure you put the possession dates out as long as possible on the property you are relinquishing to complete an exchange.
This gives you a lot more time to find that replacement.
You may even want to consider some kind of option agreement vs.
a straight purchase agreement.
d) Have good help and advice.
Whatever you do make sure all parts of your team know exactly what you want and how to get it for you.
This includes your attorney, tax advisor, Realtor, etc.
Do not have Alice having open houses on Sunday trying to help you complete an exchange on Monday, you will lose.