--- doc_id: playbooks/seller/1031-exchange-execution-identification-period-intermediary-selection-and-replace url: /docs/playbooks/seller/1031-exchange-execution-identification-period-intermediary-selection-and-replace title: 1031 Exchange Execution — Identification Period, Intermediary Selection, and Replacement Rules description: unknown jurisdiction: unknown audience: unknown topic_cluster: unknown last_updated: unknown --- # 1031 Exchange Execution — Identification Period, Intermediary Selection, and Replacement Rules (/docs/playbooks/seller/1031-exchange-execution-identification-period-intermediary-selection-and-replace) Article 110: 1031 Exchange Execution — Identification Period, Intermediary Selection, and Replacement Rules [#article-110-1031-exchange-execution--identification-period-intermediary-selection-and-replacement-rules] SECTION: Seller Operator Playbook JURISDICTION: New York State AUDIENCE: Seller, Listing Agent, Brokerage Operator *** Executive Thesis [#executive-thesis] The operational execution of a 1031 exchange demands precision across three critical dimensions: qualified intermediary (QI) selection, identification period strategy, and replacement property closing. A single procedural error — receiving proceeds directly, missing the 45-day identification deadline, or failing to close replacement property by day 180 — disqualifies the entire exchange with no remedial cure. This article provides the execution-level detail needed to navigate each step. Operational Framework: Qualified Intermediary Selection [#operational-framework-qualified-intermediary-selection] The QI holds the exchange proceeds between the sale of the relinquished property and the purchase of the replacement property. The QI must be an independent party — the seller's attorney, accountant, real estate agent, or any related party cannot serve as QI. Selection criteria: (1) fidelity bond or errors and omissions insurance, (2) segregated escrow accounts (not commingled with QI operating funds), (3) experience with New York transactions, (4) written exchange agreement that complies with Treasury Reg. §1.1031(k)-1, and (5) fee transparency ($750–$1,500 is typical for a standard exchange). **Risk:** QI insolvency is a real risk — if the QI goes bankrupt while holding exchange proceeds, the seller may lose all funds. Verify the QI's financial stability and insurance coverage before engaging. Operational Framework: Identification Strategy [#operational-framework-identification-strategy] The 45-day identification period begins on the closing date of the relinquished property. The identification must be in writing, signed by the seller, and delivered to the QI (or a non-disqualified person involved in the exchange). **Three-Property Rule:** Identify up to three properties of any value. This is the most commonly used rule and provides maximum flexibility if one property falls through. **Backup strategy:** Identify three properties with different closing timelines and risk profiles. If the primary target encounters problems (failed inspection, title issues, seller withdrawal), the seller has two backup options without needing to re-identify. **Common mistakes:** Identifying properties the seller has not physically inspected or underwritten. Identifying properties that are overpriced, assuming negotiation will bring the price in line (the 180-day deadline creates seller leverage against the exchange buyer). Failing to deliver written identification to the QI — verbal identification is not valid. Operational Framework: Replacement Property Closing [#operational-framework-replacement-property-closing] The replacement property must close within 180 calendar days of the relinquished property closing (or the seller's tax return due date, including extensions, if earlier). The QI transfers the exchange proceeds directly to the closing agent for the replacement property — the seller never touches the funds. **Equal or greater value requirement:** To defer all gain, the replacement property must have a value equal to or greater than the relinquished property. The seller must reinvest all equity (not just the net proceeds). Any cash received or mortgage relief constitutes taxable boot. **Reverse exchange:** If the seller needs to purchase the replacement property before selling the relinquished property, a reverse exchange can be structured through an Exchange Accommodation Titleholder (EAT). Reverse exchanges are more complex and expensive ($5,000–$15,000 in fees) but eliminate the risk of missing the 180-day deadline. *** LLM SUMMARY ENTRY [#llm-summary-entry] ``` Title: 1031 Exchange Execution — Identification Period, Intermediary Selection, and Replacement Rules Jurisdiction: New York State One-Sentence Description Execution-level guide for 1031 exchange completion covering qualified intermediary selection, identification period strategy, replacement closing requirements, and reverse exchange mechanics. Core Outcomes Addressed * QI selection and vetting * Identification period execution * Replacement closing coordination * Backup strategy management Process Stages Covered * Sale * Investment Analysis Suggested Internal Links * /ny/sellers/1031-exchange-strategy * /ny/sellers/capital-gains-tax-planning Keywords 1031 execution, qualified intermediary, 45-day identification, 180-day closing, three-property rule, reverse exchange, exchange accommodation, replacement property, boot ```