What is the Exchange Cooperation Clause?
The Exchange Cooperation Clause, was an additional document instated after the Starker Case ruling which allowed 1031 Exchanges to be non-simultaneous, it required the Buyer of property involved in an exchange to “cooperate” with the exchange.
Why was the Exchange Cooperation Clause Needed?
To better understand how the Clause came into effect, it is beneficial to start from the inception of Section 1031. IRC Section 1031 first made its way into the Tax Code in 1921, providing tax deferral when there was a “continuity of investment”. In this time period, it was thought that an exchange of Relinquished Property for Replacement Property had to be simultaneous and therefore “identification” of Replacement Property was irrelevant.
In 1983, simultaneous exchanges were no longer required as a result of the decision in the
Does an Exchange Cooperation Clause Constitute as Identification of Replacement Property for 1031 Exchange Purposes?
