To establish the intent to perform a 1031 exchange, the Exchangor needs to follow 1031 exchange assignment language requirements for the Purchase and Sale Agreement. The language is not required when selling, but when buying, it must appear in the contract or addendum given the rights, not the obligation of the contract are assigned to the Intermediary at the closing.
Sale of Relinquished Property:
“Buyer is aware that Seller has the option to qualify this transaction as an Internal Revenue Code Section 1031 tax deferred exchange. Seller requests Buyer’s cooperation in the event of an exchange and agrees to the assignment of this contract to Atlas 1031 Exchange, LLC by the Seller. Seller agrees to hold the Buyer harmless from any and all claims, liabilities and costs of such an exchange.”
Purchase of Replacement Property:
“Seller is aware that Buyer has the option to qualify this transaction as an Internal Revenue Code Section 1031 tax deferred exchange. Buyer requests Seller’s cooperation in the event of an exchange and agrees to the assignment of this contract to Atlas 1031 Exchange, LLC by the Buyer. Buyer agrees to hold the Seller harmless from any and all claims, liabilities and costs of such an exchange.”
Purchase of Replacement Property: “Seller acknowledges and agrees that Buyer may engage in a deferred or reverse exchange of like-kind property (an “Exchange”) utilizing a qualified intermediary (“QI”) or an exchange accommodator titleholder (“EAT”) pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations, revenue procedures and other guidance promulgated thereunder. Notwithstanding any provision herein to the contrary, in the event Buyer elects to engage in a deferred or reverse like-kind exchange, the Seller agrees to consent to the assignment of Buyer’s rights under this Agreement to a QI or EAT in order to facilitate such deferred or reverse like-kind exchange. Seller further agrees to execute any and all documents reasonably necessary to consummate the purposes of this Section. In the event Buyer engages an EAT for its Exchange, Seller agrees to transfer legal title to the Property to such EAT pursuant to instruments of transfer otherwise complying with the terms of this Agreement. Any assignment by Buyer in conformance with this Section shall be at the cost of Buyer, and such assignment shall not relieve Buyer of any of its obligations (including any post-closing obligations) or liabilities under this Agreement or delay the Closing hereunder.
If Buyer elects to use a QI or EAT in connection with an Exchange, then at the Closing Seller shall return the Deposit to Buyer so that EAT or QI may pay the full amount of the Purchase Price to Seller at Closing.”
Exchange Accommodator Titleholder Language for a Reverse Exchange in Florida
In a Florida reverse or deferred improvement exchange, where the Exchange Accommodator Titleholder takes title to the relinquished or replacement property, the following language should be inserted into the Purchase and Sale Agreement per the Florida Department of Revenue, Technical Assistance Advisement No. 05B4-006 and FDR TAA No. 07M-001 to avoid payment of the transfer or stamp tax. In addition, the warranty deed parking the property with the EAT should reflect the Florida Department of Revenue TAAs.
“Exchange Accommodator Titleholder is acting as the Taxpayer’s agent.”
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