The 1031  Steps

- PRELIMINARY -

YOU own PROPERTY-1, and,
YOU want to replace it with PROPERTY-2.

In CONTRACT-1,  YOU agree to sell PROPERTY-1 
to BUYER for SALE PRICE-1.

In CONTRACT-2,  YOU agree to buy PROPERTY-2 
from SELLER for PURCHASE PRICE-2.

- START THE EXCHANGE -

YOU engage a QUALIFIED INTERMEDIARY (a QI)

to prepare an EXCHANGE AGREEMENT
In which YOU assign both CONTRACT-1 & CONTRACT-2,

Agree to timely IDENTIFY (ID) PROPERTY-2,

then YOU Exchange PROPERTY-1 for PROPERTY-2 with the QI.

and the QI sets up your EXCHANGE ACCOUNT…next

- QI SELLS RELINQUISHED PROPERTY -

The QI sells PROPERTY-1 to BUYER,
and your Encumbrances are Paid Off

.

The Net Sale Proceeds, if any,

are deposited into your EXCHANGE ACCOUNT with the QI

and the Deed of Title goes directly into the name of BUYER.

YOU may NOT touch a penny of the proceeds of that sale!

NOTE:

If the Closing Attorney makes the check for the proceeds payable to YOU 
and YOU simply endorse it over to the QI,
the Transactions "May NOT Qualify for Non-Recognition by the IRS"

(i.e., You will have to Pay Taxes on the Gains).

- QI BUYS REPLACEMENT PROPERTY -

Within 45 DAYS of the Sale of PROPERTY-1,
YOU must ID REPLACEMENT PROPERTY if NOT done already.

After your ID of PROPERTY-2 and
your Written Authorization for the QI to disburse funds
from your EXCHANGE ACCOUNT,

The QI Buys PROPERTY-2 from SELLER,
with Funds from your EXCHANGE ACCOUNT 
(plus any Additional Funds provided by YOU or your lender)
and the Deed of Title goes Directly to YOU in your Name.

The QI does not appear in chain of title of either property.

- COMPLETE THE EXCHANGE -

If the purchase of ALL Replacement Property
does NOT occur Within the EARLIER OF 180 DAYS of that Original Sale of PROPERTY-1

or the deadline for filing your tax return as it may be extended
(or if, YOU did NOT Identify PROPERTY-2 within 45 DAYS thereafter)
the Gains from the Transactions "Will NOT Qualify for Non-Recognition by the IRS" 
(i.e., YOU will HAVE to Pay Taxes on the Gains).

The acquisition of the Replacement Property by QI completes its conveyance to YOU in the exchange,

The QI with your Written Authorization,

then Disburses the Balance of Funds in your EXCHANGE ACCOUNT, if any,

Provides a Full Accounting &  Copies of the Transactions to YOU.

YOU then File FORM 8824 to notify the IRS

that your Old Tax Basis on PROPERTY-1 is Transferred to PROPERTY-2.