WHAT IS A “COOPERATION CLAUSE?”

When you contract to sell your property, you make the buyer aware, by special language in the contract, of your intention to do a Section 1031 exchange. A sample clause is as follows:

Seller reserves the right to assign the contract to Independent Trustees, Inc., as exchange intermediary, to effect a like-kind exchange of the Property in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. Purchaser consents to such assignment and agrees to sign a Notice of Assignment prior to closing confirming that Purchaser has received the Notice of Assignment and consented to the assignment.

This will not delay the closing nor will it cause the buyer any additional expense.

A similar clause must be inserted in the contract for your replacement property to advise the seller of that property of your intention to do a 1031 exchange. A sample clause is as follows:

Purchaser reserves the right to assign the contract to Independent Trustees, Inc. to effect a like-kind exchange of the Purchaser’s real property, in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. Seller consents to such assignment and agrees to sign a Notice of Assignment prior to closing confirming that Seller has received the Notice of Assignment and consented to the assignment.

HOW DO I GET STARTED?

NOTE: The content of this website is informational only. It does not constitute tax, legal or accounting advice. Each situation is different and you are advised to seek appropriate professional advice to see if a 1031 Exchange meets your needs.