So often, a frustrated lawyer will call me to explain that his/her client is closing on the sale of an investment property in a few days (or this afternoon!) and has “suddenly” decided that the sale should be the first leg of a 1031 Exchange transaction. Is it too late? Can we paper the closing in time? (Usually, we can). The unspoken text: “Clients! Can’t live without ‘em, can’t shoot ‘em!” The attorney believes his client is capricious and disorganized.

The other frequent call I get is from a frustrated seller who just closed on their sale of investment property only to have learned that they could have saved the cost of capital gains tax if they had been advised to do a 1031 Exchange. Can they now turn the transaction into a tax-free exchange, or is it too late? (Usually, it is too late.) Here, the unspoken (or loudly spoken) text is: “My lawyer was (note the past tense) an incompetent hack—she should have advised me how to save thousands of dollars in capital gains taxes by making the sale of my property part of a tax-free exchange.”

Instead of this “I could have had a V-8 Juice” moment, what a better world it would have been if the attorney, in her first discussion with her seller client about the investment property sale had asked if the transaction would be part of a 1031 exchange. If the client had replied “What’s a 1031 exchange?”, the attorney would have had the opportunity to explain that by selling an investment property, then identifying replacement property(ies) within 45 days of the sale and closing on the purchase of the replacement property(ies) within 180 days, her client could save many thousands of dollars in capital gains tax. The attorney would have provided excellent business advice and earned her fee (possibly several times over) out of the capital gains tax savings. The client would have been impressed with the attorney’s advice and the seeds of an ongoing client-attorney relationship could have been sown. It’s that simple, and First American Exchange would be happy to step in immediately and answer any further questions the client might have. The decision to structure a sale of investment property as a 1031 exchange should never be a last minute decision or, worse, an afterthought. It should be an item on the experienced attorney’s initial transaction intake checklist.