I'm getting ready to enter into a purchase and sale agreement for the sale of rental property that I will be doing a 1031 exchange on.  What langauge do I need to put into the agreement so that it works with the 1031 exchange? 

First and foremost, you must make sure that you have your Qualified Intermediary (Accommodator) assigned into your purchase and sale agreement and your escrow instructions (if any) before the sale of your relinquished property transaction closes.

Going back to your question, contrary to popular belief, there is no requirement from a 1031 exchange point-of-view that any specific language be included in your purchase and sale agreement or escrow instructions.  Advisors used to insist on including specific language that was referred to as a "cooperation clause" in the purchase and sale agreement and any escrow instructions, if any, in order to ensure that the transaction would qualify as a 1031 exchange because we did not have any guidance from the IRS. However, once the 1031 Exchange Treasury Regulations were issued it became clear that there was no specific requirement to use this language.

It might be a good idea to include "cooperation clause" or other disclosure language for legal reasons, but it is not required for 1031 exchange purposes.  You can view suggested cooperation clause langauge at http://www.exeter1031.com/sample_cooperation_clause.aspx.

Hope that helps.