A forward exchange is the most common type of exchange. It occurs when the relinquished property sells prior to the acquisition of the replacement property. A forward exchange is subject to strict time limits, which are set forth in statutory language of IRC § 1031.
Our Exchange Procedure for a Deferred (Forward) Exchange
We prepare the exchange documentation and forward it to your closing or escrow agent, along with wire transfer instructions for the exchange funds. The exchange funds are then invested in a money market account with one of our relationship banks, or another bank of your choosing. Most importantly, your exchange funds are held in a qualified escrow account and are not commingled with any other client or business funds for investment purposes. For more information, see “Why are Your Exchange Funds Secure With Us?”. Your tax identification number is on the account and you receive monthly statements directly from the bank showing the principal balance and accrued interest. Thus, you can independently verify the amount of your funds.
After the closing on the relinquished property, you have 45 days to identify the replacement property. We will send you a letter specifying your 45th day, and containing information on how to identify the replacement property. You have 180 days from the closing of the relinquished property, or the due date of your tax return for the year of the transfer of the relinquished property, including extensions, to actually acquire all your replacement property. We prepare the exchange documentation and send it to the closing agent for the replacement property. The exchange funds are then wired directly from your exchange account to the closing agent.