Disclaimer –The following is not to be taken as legal advice. It is not to be taken as accounting advice. Consult your attorney and accountant before entering into any transaction involving the issues and investment vehicles described below.

Following are a few of the major requirements:

       1. The Seller can not receive any of the money from the transaction - or to the extent they do, that portion is subject to Capital Gains Tax. (The Seller would hire the Services of an "Accomodator" such as "DownStream Exchange" to comply with this requirement.) 

        2. The replacement property has to be "like kind" ie. an investment property for an investment property. A 4 unit rental property (held for investment) can't be sold and be replaced with a vacation house (purchased for personal use.)

        3. There are timing issues. Generally, up to three properties have to be identified as potential replacements within 45 days of the close of the Sale. One of those properties has to be purchased within 180 days of the Close.

        4. There has to be at least as much equity and at least as much debt in the replacement property as in the one that was sold.

       5. The intent has to be that the property is to be kept for "long term" investment.

 If these requirements are met, the exchanger is able to put all of the equity acquired in the sale to work for them, rather than just a portion.