We are able to assist you with a variety of exchanges based on your situation. Below is a detailed list of the different types of exchanges that we help with.
Please don’t hesitate to contact us if you would like to discuss your situation.
Forward/Delayed Exchanges: The most common like-kind exchange is sometimes referred to as a forward/delayed exchange. A forward/delayed exchange is when a taxpayer sells business or investment property and looks to invest in replacement property within the 180 day time frame. The net sale proceeds are held on behalf of the taxpayer by the Qualified Intermediary (QI). The QI then uses the proceeds to purchase another like-kind property. If properly done, the tax on the sale of the property will be deferred.
Reverse Exchanges: In a Reverse Exchange, the eventual Replacement Property is acquired before the sale of the Relinquished Property. The most common reason for needing a Reverse Exchange is that the taxpayer has not found a buyer for their old property yet wants to acquire the new property. For the 1031 to work, the taxpayer may not hold the new property acquired and the old property at the same time. Therefore, most commonly, the newly acquired property is “parked” by an unrelated third-party, referred to as an Exchange Accommodation Titleholder, until the old Property is sold. There are so-called safe harbor regulations for a Reverse 1031 exchange that were first outlined by the IRS in Revenue Procedure 2000-37. This Revenue Procedure specifically noted that the Reverse exchange transaction must be completed within 180 days in order for a taxpayer to qualify for safe harbor treatment. The IRS in describing the safe-harbor rules included “no inference” language in the Revenue Procedure whereby it stated that a taxpayer should not infer that the transaction will not qualify for deferral if the transaction varies from the safe harbor requirements. The fees associated with these exchanges are higher due to the transactional complexity.
Construction Exchanges: A Construction Exchange (also known as a “Build-to-Suit” Exchange), is used to make improvements to the replacement property to be acquired. As long as the value of the improvements plus the cost of the replacement property is equal to or greater than the value of the old property, the construction exchange allows taxpayers to defer the capital gains tax and recaptured depreciation triggered when the old or relinquished property was sold. The Internal Revenue Service requires that an Exchange Accommodator Titleholder (EAT) be created to park or take title to the property while it is being improved. The property must be held by the EAT until either the improvements are complete or the 180 day exchange deadline occurs. On or before the 180th day, the improved property must be transferred to the Exchanger as the Replacement Property, in completion of the exchange. These transactions may also be structured as Reverse Construction Exchanges. The fees associated with both of these exchanges are higher due to the transactional complexity.
