1031 Exchange Closings in Florida

What a title company does in a 1031 exchange

In a typical delayed exchange, three parties share the work. You and your tax advisor decide the strategy. A qualified intermediary holds the sale proceeds and documents the exchange. The title company closes each transaction. Our part:

• Closing the sale of your relinquished property. We set up the closing so the proceeds go to your qualified intermediary, not to you. If you receive the money, even briefly, the IRS treats the transaction as a sale.
• Closing the purchase of your replacement property. We receive the exchange funds from your intermediary, issue title insurance on the new property and record the deed.
• Keeping the paperwork consistent. The exchange agreement, assignments and closing statements have to line up. We coordinate with your intermediary so names, vesting and figures match on both closings.
• Working to your calendar. We order title on the replacement property as soon as it is under contract and flag problems early, while there is still time to fix them before your deadline.

We also close the transfers in reverse and improvement exchanges, which your intermediary structures.

The deadlines that make or break an exchange

• 45 days to identify. You must identify your replacement property in a signed, written document within 45 days after you transfer the property you are selling. It is usually delivered to your qualified intermediary. Sending it only to your own attorney, real estate agent or accountant does not count.
• 180 days to close. You must receive the replacement property within 180 days after the sale, or by the due date of your tax return (including extensions) if that comes first. Both clocks start on the same day and run at the same time.
• No extensions. The IRS does not extend these deadlines for hardship. The only exception is relief for presidentially declared disasters.

How many properties you can identify

Most investors use the three-property rule: identify up to three properties of any value. The alternative is to identify any number of properties whose combined value is no more than 200% of the value of the property you sold. If you identify more than either rule allows, the identification fails, unless you end up acquiring at least 95% of the value of everything you identified.

What qualifies

Since 2018, Section 1031 applies only to real property held for use in a business or for investment. Rental homes, condos, commercial buildings and land can generally be exchanged for one another, whether improved or unimproved. A primary residence, a vacation home you use personally and property held mainly for resale, such as a fix-and-flip, do not qualify. Property in the United States is not like-kind to property outside the United States.

Taxes and closing costs in Florida

• Deferred, not forgiven. The gain is postponed, not eliminated. Cash you take out of the exchange, or debt relief that is not replaced, is taxable “boot.” The exchange is reported on IRS Form 8824.
• Doc stamps still apply. Florida taxes each deed in an exchange at its value, and Florida’s list of exempt transfers does not include 1031 exchanges. The rate is $0.70 per $100 of the price, except in Miami-Dade, where it is $0.60 for a single-family home and $1.05 for other property.
• Title insurance. Premiums on the replacement property are set by Florida rule, so they are the same at every title company. Our closing cost calculator gives you an estimate in a minute.
• No Florida personal income tax. For individuals, the deferral question is federal. If you are exchanging out of another state, that state may have its own rules; California, for example, requires an annual filing when California property is exchanged for property elsewhere.

Before you list: a short checklist

1. Talk to your CPA or tax attorney about whether an exchange fits your situation.
2. Choose a qualified intermediary and sign the exchange agreement before the sale closes.
3. Tell us, and your buyer, that the sale is part of a 1031 exchange so the contract and closing documents reflect it.
4. Start looking for replacement property early. Day 45 arrives fast.
5. Call us as soon as the replacement property is under contract so we can order title the same day.

Common questions

Can I hold the sale proceeds myself until I buy?

No. If you or your agent receive the money, the IRS treats the transaction as a sale and the deferral is lost. The funds go from the closing to your qualified intermediary, and from the intermediary to the replacement closing.

Can my real estate agent or accountant be my intermediary?

Generally not. Anyone who acted as your agent, including your employee, attorney, accountant, broker or real estate agent, within the two years before the exchange is a disqualified person. Routine title insurance and escrow services do not by themselves make a title company your agent under that rule.

Can I exchange with a family member or a company I own?

Special related-party rules apply. If either side disposes of the exchanged property within two years, the deferral can be lost. Review any related-party exchange with your tax advisor before you sign a contract.

Does the replacement have to be the same type of property?

No. Real property is generally like-kind to other real property held for business or investment. You can exchange a rental condo for a commercial building or land, for example.

Start your exchange closing

Call (305) 603-8393 to talk to Luis about your exchange timeline, or send us your contract. Investors buying commercial property should also see our commercial title services, and you can browse all of our title services.

This page is general information, not tax or legal advice. 1031 exchanges have strict requirements, so confirm your plan with a CPA or tax attorney. Sources: 26 U.S.C. §1031; Treas. Reg. §1.1031(k)-1; IRS, Like-Kind Exchanges: Real Estate Tax Tips; Fla. Admin. Code R. 12B-4.013; Florida Department of Revenue.