The Delayed exchange is the most widely used variety of 1031 exchange. This type of exchange occurs when the taxpayer sells their relinquished property and there is a time delay prior to the purchase of the replacement property. Usually the steps are as follows:

1. Prior to initiating the exchange it is recommended that the taxpayer consult their accountant as to the suitability of the exchange for their transaction.
2. The taxpayer will initiate a contract for sale of the relinquished property and add an addendum to the contract stating the transaction will be a Section §1031 exchange. See Addendum for example.
3. Next the taxpayer will contact the Qualified Intermediary (QI) and supply the QI with a copy of the sale contract, closing agent name and contact information along with estimated closing date. See Information Sheet

4. The QI will then prepare documentation and contract for exchange, which will be mailed/faxed to the taxpayer for review, signature and return.
5. The QI will also send all the necessary information to the closing agent so that funds from the sale are sent directly to the QI, any funds taken by the taxpayer at closing will be considered boot by the IRS and taxable for capital gains.
6. On or before the closing date the closing agent will forward a copy of the settlement statement for approval to both the taxpayer and the QI.
7. Once the closing on the relinquished property takes place the closing agent will forward all the funds (to be placed in an interest bearing account) and fees to the QI.

8. The taxpayer will contact the Qualified Intermediary (QI) and supply them with a copy of the purchase contract, closing agent name and contact information along with estimated closing date.
9. The QI will then prepare documentation and contract for the exchange, which will be mailed/faxed to the taxpayer for review, signature and return.
10. The QI will also send all the necessary information to the closing agent so that they can supply a copy of the settlement statement and wire transfer instructions prior to closing.
11. On or before the closing date the closing agent will forward a copy of the settlement statement for approval to both the taxpayer and the QI.
12. Once the closing statement is finalized the QI will either wire transfer the taxpayers funds or supply a cashiers check to the closing agent.
13. At this point if there are no remaining funds then the account will be closed and if any interest is earned then this will be forwarded to the taxpayer. (Interest is not part of the exchange).
14. There are instances where money is remaining;
    1. The remaining funds may be used for repairs on the replacement property if these repairs are completed within the 180 days. Please contact the office if this is your plan as there are additional steps.
    2. Please see 45 day designation period to understand how remaining funds will be distributed.