We’ve decided to take some of the proceeds from the sale of NE Ivy (the relinquished property in 1031 speak) and pay the capitol gains on it. The majority of the money is being used for the down payments on two new properties. The trick is that the IRS doesn’t allow the 1031 Exchange company (the accommodator) to release funds to us until:
1) the end of the identification period if no property has been identified
2) all identified property has been acquired or
3) the 180th of the exchange.
Even though we will have closed/acquired all of the identified property prior to the 45th day, the funds must remain in the account until after the 45 days are up.
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You can take cash out at the close of the Relinquished Property escrow, and exchange a portion of the proceeds if you choose. This is fairly common in 1031 exchange transactions. The escrow or title company would cut a check to the Exchangor for the dollar amount they choose and send the remainder to the Facilitator. Of course the amount that the Exchangor receives is taxable “boot” to them. The cash that goes to the Facilitator must remain there until one of the above mentioned occurs. We typically like to find out what the cash will be used for, as there may be options that better suit the Exchangor depending on their specific situation. http://www.1031exchange.com