1031 Tax Deferred Echange

Reverse Exchange

45 day identification period

180 day total exchange period

The Exchange Accommodator title holder is not the taxpayer or a disqualified person and is subject to federal income tax

The Accommodator must hold all indicia of ownership at all times from the date of its acquisition of either the relinquished or replacement property until the property is transferred to either the taxpayer as replacement property, or as relinquished property to a person who is not the taxpayer or a disqualified person.

No later than 5 business days after the transfer of ownership of the property to an accommodator, the taxpayer and the accommodator must enter into a written qualified exchange accommodation agreement.

The taxpayer or a disqualified person may guarantee the obligations of the accommodator (including debt incurred to acquire the property) and may indemnify the accommodator against costs and expenses.

The accommodator may lease the property to the taxpayer or a disqualified person.

The taxpayer or a disqualified person may loan or advance funds to the accommodator.

The taxpayer or a disqualified person may manage the property, supervise improvements, act as a contractor or provide other services to accommodator with respect to the property

Basics of tax deferred exchanges

Doing an IRC Section 1031 tax-deferred exchange is often but not always the best strategy for investors. Below are reasons to do an exchange and reasons not to do an exchange.

You would want to do an exchange if...

you want to dispose of one or more properties (the "relinquished property"), acquire one or more like kind property (the "replacement properties"), and you have a gain on the relinquished property which you do not want to pay taxes on;

the additional costs to do an exchange do not exceed the tax on the gain if a sale was done instead of an exchange.

You would not want to do an exchange if...

You do not have a gain on the relinquished property;

You have no desire to acquire more like kind property;

You have property with a capital loss and want to "recognize" the loss (i.e., if you want to use the loss to offset other gains you do not want to do an exchange);

You want the benefit of a higher basis and greater depreciation in the replacement property that a straight purchase allows. (Since the Tax Reform Act of 1986 selling a property instead of exchanging it, recognizing the gain, then reinvesting to get a higher depreciable basis is generally not the preferred strategy. However, check with your tax advisor so they can run the calculations and comparisons for you.)

Now that you know the reasons to exchange and the reasons not to exchange, it is important to know the difference between a straight sale and a qualified exchange. The next section, Sale vs. Exchange, will discuss these issues with you.

Sale vs. Exchange

The primary distinction between an exchange and what the courts refer to as a "sale/reinvestment" is the documentation that is used. To turn a sale transaction into an exchange transaction you must have additional paperwork completed before the first closing. To state it a different way, most exchange transactions start off as a normal sell-then-buy transaction. Prior to selling your first property, the law allows you to turn your sale into an exchange, however, you must document this transformation very clearly. The only way to obtain the proper documentation is from one of two sources: a qualified intermediary or an attorney. Providing this exchange documentation is our chief reason for being in business! It is what we do day in and day out, eleven hours a day, fifty-five hours a week (excluding holidays, of course).

Intent, Substance, Form

For those of you who would like even more detailed information, the following is for you. In order to distinguish an exchange from a sale/reinvestment, many years ago the courts determined that the taxpayer must have a clear and documented intent to exchange, the transaction must have the substance of an exchange and that the form of the transaction must be that of an exchange and not of a sale/reinvestment. A brief explanation of each follows.

Intent is exactly what it says...the taxpayer must express in writing prior to the transfer of their first property their motivation to effect an IRC Section 1031 tax-deferred exchange. This can be done in the listing agreement, a counter-offer with the buyer, an addendum or attachment, or in an exchange agreement provided by us. Easy to accomplish.

The second requirement is the substance of the transaction which is simply the end result...who gets what? In other words, at the end of the transaction, after the "dust has settled", who ended up with what? The interesting thing about substance is that the substance of a sale/reinvestment is the same as the substance of an exchange. Everybody ends up with the same thing whether the transaction is an exchange or a sale/reinvestment! Also easy to accomplish.

The third requirement, form, is the one that is too often overlooked, probably because it is not widely understood. Many think that expressing the intent in writing somehow creates the exchange and by simply putting something like "It is Seller's intent to effectuate a Section 1031 tax-deferred exchange" in a closing document will suffice...wrong! Form makes or breaks an exchange transaction! Form refers to the structure of the exchange and the structure is created with the proper paperwork. This is how the courts differentiate an exchange from a sale/reinvestment. The most important document in an exchange is what is known as the "exchange agreement". This document specifies all of the details and the form of the exchange, especially those details that are different from a normal sale/reinvestment. Without this additional document you have no exchange! And once again, this is what we are primarily in business to provide.

But, what kinds of property qualify for IRC Section 1031? The next section, Like Kind, will discuss what the code and the courts consider qualified property.

LIKE KIND

What types of properties qualify for a Section 1031 exchange?

The code states that the property disposed of and the property acquired must be "like kind" to each other. The code also states that this property must be..."held for productive use in a trade or business or for investment..." Clear as mud. Fortunately, our answers come from nearly eight decades of IRS and court rulings. (If you only read the tax code without supporting rulings, regulations and decisions, it would be impossible to understand it properly!)

Property-Section 1031 does not use the terms "real estate" or "personal property". It merely states "property". This more general term means that both real estate and personal property (all non-real estate property) may qualify for 1031 treatment ("non-recognition"). However, as you will learn in more detail below, real property and personal property are never like kind to each other. The point here is that, even though there are specific rules to follow, Section 1031 is far broader and more applicable than most taxpayers realize.

Trade or Business Property-Generally, this is depreciable property or stated another way, this is property that qualifies for depreciation. Check with your tax advisor to determine whether your property qualifies for depreciation. Remember that this applies to both real property that is depreciable and personal property that is depreciable. A partial list of possible depreciable property is as follows:

REAL PROPERTY

single-family rent houses

apartments

shopping centers

warehouses

hotels and motels

hospitals and nursing homes

office buildings

home offices

PERSONAL PROPERTY

airplanes

boats

farm equipment

tractor/trailers

furniture

recreation equipment

Owner-user property falls under this category as well if the property is used for a trade or business purpose as does a building the investor owns and operates their business in or even a home office (just that percentage of the home used for the business!). However, personal use property, such as the taxpayer's primary residence or a pleasure boat or any property not used for a business or investment purpose, would not qualify for Section 1031 treatment.

Investment Property-If your property is not depreciable and does not qualify as trade or business property, do not despair, your property may be considered "investment" property.

Generally, this is property that does not qualify for depreciation (non-depreciable). Again, your tax advisor will determine whether or not your property is depreciable. A partial list of possible investment property is as follows:

REAL PROPERTY

vacant land

a non-depreciable building

PERSONAL PROPERTY

gold coins (not in current circulation)

major league athletes' contracts

leases with less than 30 years remaining (including unexercised options)

licensing agree- ments/contracts

emission credits

Now then, when doing a real property exchange, IT DOES NOT MATTER WHETHER THE PROPERTY IS TRADE OR BUSINESS, OR INVESTMENT PROPERTY. An apartment building can be exchanged for a hospital, several single-family rent houses for a shopping center, and raw land can be exchanged for an office building. Yes, that's right! Raw land (non-depreciable, non-income producing, investment property) can be exchanged for a hospital (depreciable, income producing, business property). It also does not matter how many properties are disposed of and how many properties are acquired as long as they qualify as like kind and meet the rules of identification. However, when doing a personal property exchange, THE TYPE OF PROPERTY DOES MATTER. An airplane must be exchanged for an airplane, a boat for a boat, cattle for cattle (livestock received must be the same sex as livestock disposed of!), a dump truck for a dump truck, etc. Because of the potential complexity, consult with your tax advisor prior to effecting an exchange then we will assist you in structuring an exchange with the proper paperwork.

Non-Like Kind,

As the term "non-like kind" implies, this is property that never qualifies for 1031 treatment. Here is a list of non-like kind property (see Code for complete list):

stock in trade or other property held primarily for sale,

stocks, bonds, or notes,

other securities or evidences of indebtedness or interest,

interests in a partnership,

certificates of trust or beneficial interests,

choses in action

foreign property for US property (or vice versa),

personal property for real property (or vice versa),

money, cash, or cash equivalents,

mortgage/debt relief,

livestock of different sexes (really!)

primary residences,

personal use property (non-business or non-investment), or

all other disqualified property

In an exchange, the non-like kind property is called "boot". Boot is the more common term. As with most aspects of Section 1031, there can be a mass of information, however, the following few explanations and examples should be easy to follow and understand. Even so, check with your tax advisor regarding your personal situation as we are only trying to provide the basic information here and intentionally not attempting to provide legal or tax advice.

There are two categories of boot: 1) cash boot and 2) mortgage boot. THE FACT THAT YOU RECEIVE SOME BOOT MAY NOT DESTROY THE ENTIRE EXCHANGE; WHAT YOU WOULD HAVE IS A PARTIALLY TAX-DEFERRED 1031 EXCHANGE. If it is determined that you must pay tax on the boot you receive, it is taxable at your ordinary income rate, not the capital gains rate!

Cash Boot

Cash boot is more than just cash and money. Cash boot is technically all other types of boot other than mortgage boot. The list of non-like property above (except for mortgage boot) can be considered cash boot.

Here are a couple of simple examples. Assume that the taxpayers below are disposing of property that have a realized gain which is motivating them to do a 1031 exchange instead of a straight sale or a sale/reinvestment:

1. The Askews are doing a real property exchange. They are disposing of a four unit building and acquiring two single-family properties. They plan on renting one property and immediately moving into the other one. Because Section 1031 only applies to business and investment property and not to personal use property, the home they are moving into would not qualify as like kind property. This portion of the exchange would be called boot and may be taxable.

2. The Moezzis are doing a real property exchange. They are disposing of a piece of land and acquiring a commercial building in a different state. The buyers do not have quite enough money to buy the Moezzis' property so the Moezzis agree to loan the buyers the needed money, i.e., the Moezzis are carrying a note on the land. Because the note is personal property and not like kind to real estate, the Moezzis are said to have received cash boot. (To learn more on notes and how to avoid paying tax on them, see Notes on Notes under the Special Situations link).

3. Fly-by-night Airlines, a commercial freight carrier, desires to do a personal property exchange. They have an airplane that they desire to dispose of and acquire a cruise ship as their replacement property. Will this qualify as a like for like exchange? No. Remember, qualification for a personal property exchange is quite narrow; a boat for a boat, an airplane for an airplane, a dump truck for a dump truck, etc. Nor could they exchange the airplane used in their business for an airplane to be used for pleasure (personal use). [Drop by the IRS's website. They cover this material in substantially more detail.]

Mortgage Boot

Mortgage boot is also known as mortgage relief or debt relief and is often overlooked as most taxpayers do not know and have not been advised that it can create a taxable event. As the term "debt relief" implies, it occurs when the total debt on all the replacement properties is less than the total debt on all the relinquished properties. When this occurs you are said to have received mortgage boot. The unfortunate situation with mortgage boot is that the boot you have received is intangible, it's an economic benefit in which you have not received anything physical for, whereas, when you receive cash boot you have received tangible property (often cash) in which to use in part to pay the tax with. The code allows a way to offset this mortgage relief to avoid being taxed on it by adding cash boot, however, it is not possible in every exchange. You definitely need to speak to your tax advisor to learn more about offsetting mortgage boot.

Simple example of mortgage relief:

Taxpayer wants to dispose of three low basis properties and acquire four like kind properties in order to utilize Section 1031 and defer the tax. The aggregate debt on the three relinquished properties equals $200,000 and the aggregate debt on the four replacement properties equals only $150,000. The taxpayer is said to have received $50,000 of mortgage boot. (Whether they will have to pay a tax or not is not possible to determine with the limited information in this example.)

TIME FRAMES

How long do I have to complete an exchange?

The answer depends on what type of exchange you do. If you are doing a deferred exchange the law imposes two time limits on you that are not imposed with any other type of exchange. (If you are doing a simultaneous exchange with a same-day closing of all properties, then you are not bound by these time frames.) A deferred exchange is one in which you first dispose of the relinquished property then on a subsequent date acquire the replacement property. From the date of the first transfer of your relinquished property you have a maximum of 180 days to complete your exchange (the "exchange period"). From the same date, the date of the first transfer of your relinquished property, you have a maximum of 45 days to properly identify your replacement property (the "identification period").

Here are a few important points to note:

Both the 180 day and the 45 day time frames begin on the same date

Neither the 180 day nor the 45 day time frames can be extended for an reason even if these dates fall on a Saturday, Sunday or legal holiday.

The exchange must be completed the sooner of 180 days or the due date of the taxpayer's tax return, whichever is sooner. The logic here is that the law allows you to start an exchange in one year and complete it in the next as long as you complete it before you file your taxes for that previous year.

If the due date of your taxes occurs before the 180th day and you have not completed your exchange the law allows for you to file for an extension of your tax return to be able to receive the full 180 days, however, you are never allowed more than 180 days.

The word used in the IRS Regulations, "transferred", is intentionally used instead of other terms such as "closing", "close of escrow", "date of recordation", etc. This allows for different geographical customs regarding transfer of ownership (legally, ownership is transferred when the "benefits and burdens" of ownership are transferred). If you transfer more than one relinquished property on different dates, the 45 and 180 days both begin on the date of the earliest transfer.

For those of you who would like to know more about this subject, a reading of the Regs would be beneficial. For the most part, they are understandable, unlike trying to read the tax code. Call the IRS or check out their website for more information.

EXCHANGE AGREEMENT

Here are a variety of questions and statements in which the underlying question is the same and the answer is the same, also. If you have not read Sale vs. Exchange it would be very helpful if you did that now then come back to this FAQ.

"My [advisor] said I could save money if I let the title company (or closing attorney, etc.) take care of everything", or "I was told by my [advisor] that all I needed to do was put a phrase in my listing agreement (counter-offer, addendum to the purchase agreement, etc.) expressing my intent to do an exchange", or "why do I need an exchange agreement?"

There are three main requirements in order for a sale to be transformed into an exchange--intent, substance and form. As explained in Sale vs. Exchange, intent and substance are easy. In fact, when the investor's [advisor] says to put a phrase in a document prior to closing, all they are really accomplishing is having the investor express their intent. In order to be sure intent, substance and form are all present before the first transfer of a relinquished property is to have either a qualified intermediary or an attorney provide an agreement to exchange ("exchange agreement"). In deferred exchanges, the IRS Regulations specifically require an agreement to exchange. Having proper, clear documentation is the only way the IRS and the courts can determine if the three requirements are present.

The exchange agreement is a complex legal agreement between the investor and the accommodating party ("accommodator"). (The accommodator could be a qualified intermediary such as us, The National 1031 Exchange Corporation, the buyer of the relinquished property, or the seller of the replacement property. When we are the accommodator, we provide the exchange agreement because the agreement is between the taxpayer and us. However, when the buyer of the relinquished property or the seller of the replacement property act as the accommodator, an attorney must draft the exchange agreement. These are the only two options except for a two-way exchange, which is very rare and unlikely.) The exchange agreement's primary purpose is to transform a sale into an exchange. It is generally an attachment to the purchase agreement so that there is generally no need to supercede everything that is in the purchase agreement. The exchange agreement spells out all of the details of the exchange, reciting parts of Section 1031 and the Regulations, pointing out what obligations the investor has and what obligations the accommodator has, what type of deeding will be used, and much more.

Without an exchange agreement, there is no exchange!

Identification Rules.

"How many properties can I identify, how do I identify them and to whom do I identify them?" (A word of warning: the below answer may not make sense upon first reading. If you still have questions after reading, please call us or your tax advisor to provide further explanation.)

In theory, you can acquire as many properties as you want, however, as a practical matter, you won't be able to because the IRS has provided a set of identification rules to be followed when doing a deferred exchange. Keep in mind, the following rules only apply if you are doing a deferred exchange. If you close your replacement properties at the same time that you close your relinquished properties, there are no identification rules to abide by.

Per the IRS Regulations, there are several rules for identifying properties in a deferred exchange. The IRS rules in abbreviated form are as follows:

Manner of identifying replacement property

1.  Before midnight of the 45th day from the date of the transfer of the first relinquished property;

2.  In writing;

3.  Unambiguously described;

4.  Signed by the taxpayer;

5.  Sent to any person involved in the exchange other than the taxpayer or a disqualified person.

Following are rules governing how many properties can be identified during the 45-day period (the "Identification Period"):

Alternate and multiple properties

The investor may identify more than one replacement property. Regardless of the number of relinquished properties transferred by the investor as part of the same deferred exchange, the maximum number of replacement properties that the taxpayer may identify is--

1. Any three replacement properties of any value ("3-property rule"), or

2. Any number of replacement properties as long as their aggregate value does not exceed 200 percent (two times) of the aggregate value of all the relinquished properties ("200 percent rule"), or

3. Any number of replacement properties even if their aggregate values exceed 200 percent of the aggregate value of all the relinquished properties as long as the taxpayer receives at least 95 percent of the value of all identified properties ("95 percent rule").

Any property acquired during the identification period is considered to be property properly identified.

Caution: If one of these three rules is not abided by in full, there will be no exchange!

Call us. We will provide an explanation and a form to fill out that meets the above requirements.

By now, you are probably aware that not just anyone can hold the net proceeds from the disposition of your relinquished properties. Why can't you just use a family member or your trusted personal attorney? The next section, Agency and Constructive Receipt, discusses these issues, and more.

Agency and Constructive Receipt

"If I am doing a deferred exchange can I use the title company (or closing attorney, or personal attorney, or real estate agent, or personal accountant, or someone I know well and trust) to hold the net proceeds from the disposition of my relinquished property?"

No! The IRS has clearly stated in their 1991 1031 Regulations in the Definition of disqualified person that a person is an agent to the taxpayer at the time of the exchange if the person is or has been within the previous two-year period..."the taxpayer's employee, attorney, accountant, investment banker or broker, or real estate agent or broker." This list is not all-inclusive but serves to provide examples of the types of persons and relationships the IRS deems to be agents to the taxpayer. If any agent to the taxpayer holds or touches the net proceeds from the disposition of the relinquished property it will cause constructive receipt of the funds and disqualify the exchange. The IRS considers having indirect control of money through an agent (constructive receipt) as no different than having direct control of the money (actual receipt).

Here is what the IRS says about constructive receipt on their website: "You constructively receive money or unlike property at the time the money or property is credited to your account or made available to you. You also constructively receive money or unlike property at the time any limits or restrictions on it expire or are waived."

Why would an investor do this when it is so clear that they can not?

Two simple answers: 1) they do not know what the rules are, and/or 2) trust.

Trust becomes a factor in a deferred exchange because the investor soon learns that they can not touch or control the net proceeds but wants someone they know to hold it for them; their friend, a relative, an employee, their personal attorney. The thought of having an unknown party (the qualified intermediary), possibly even an out-of-state qualified intermediary, hold the net proceeds is not comforting. However, the "Catch 22" is that if they do not allow a disinterested, non-agent entity (The National 1031 Exchange Corporation, for example) hold the funds, there will be dire tax consequences to pay because there will be no exchange otherwise.

Security is the most important and serious consideration for an investor when doing a deferred exchange and we do not take it lightly. Fortunately for the investor, there are completely safe alternatives when doing deferred 1031 exchanges which also avoid the agency and constructive receipt traps. Actually, the safest way is to not do a deferred exchange but to do a simultaneous exchange so that no outside entity is holding the net proceeds. However, even if this is done, if the settlement statements are not done properly and somehow reflect that the taxpayer received the funds, this too would blow the exchange. The other way is to only use a qualified intermediary company, which can prove to provide oversight to the details of the transaction and complete security of the funds within the Regulations setforth by the IRS in 1991. According to these Regs, there are three ways to protect your equity when doing deferred exchanges as explained in Security of Funds.

Security of Funds

This is the single most important issue when doing a deferred exchange and we can provide the security for you. Please take the time to read and understand this aspect of the 1031 exchange law.

Here is one question that we are often asked in many different ways regarding the safety of the funds we will be holding after the sale of the relinquished properties:

"How can I be sure my funds are safe during a deferred exchange?"

"Who are you guys?"

"Where are you located?"

"Are you insured?"

"Are you regulated?"

"Can I use my attorney (brother, accountant, best friend, etc.) to hold my funds?"

"Can I use my bank?"

These are important questions because this is an important issue...the single-most important issue when doing a deferred exchange. Security of the funds and the ability of the intermediary to safely complete the exchange should be the primary factor to determine what company to use. Not fees. Not location. Not because you know someone who knows the accommodator. Not because they have a website. Not because they say they are the biggest or oldest. These are absolutely useless measurements of security. Once you are satisfied with the ability of the accommodator to provide security, then and only then evaluate the other factors such as experience, convenience, turn-around time, size of company, costs, etc.

Not all qualified intermediaries provide the same level of security. In this industry there are generally considered two categories of qualified intermediaries: 1) title company-owned, and 2) independent. To our knowledge, there has never been a loss of money when dealing with an intermediary owned by a major title company. However, there are numerous cases of investors losing millions and millions of dollars through independent accommodators who have stolen the investors' money, gone bankrupt, or lost all of the money they were entrusted with through bad investments or business practices. And if the funds that the intermediary was holding vanished (in many cases peoples' life savings!), you may still have to pay the taxes on the realized gain from the sale of your property! This is not to say that all independent accommodators will abscond with your money but it is to say that they do not have the enormous financial backing that intermediaries owned by major title companies do.

Why take chances?

It was only relatively recently, 1991, that the IRS finally provided regulations regarding the security of funds. These regulations now allow the qualified intermediary to provide to the investor one of three approved security instruments to assure the completion of the deferred exchange according to the exchange agreement. And yet, still most accommodators do not offer any protection. (Correction...there is one common method that the independent accommodators use but it is not one of the three sanctioned by the 1991 IRS Regulations. This commonly used method is a two-signature account where both the signature of the taxpayer or an agent of the taxpayer signs to release money along with the signature of the accommodator. Nowhere in the Regulations does the IRS approve of this method! The potential downfall of this or any other non-sanctioned method is constructive receipt of all the funds. If you read the FAQ on Agency and Constructive Receipt you will remember that the end result of constructive receipt is that you have no exchange; you have a sale/reinvestment. Blown exchange, no tax deferral, pay the tax!

Answers to the above questions

"Can use someone I personally know and trust hold the funds such as a relative or personal tax advisor?"

No. The IRS regulations clearly consider these arrangements to be agency relationships, which cause constructive receipt and a disallowance of the exchange.

"Are the accommodators licensed or regulated?"

Unfortunately, no. Except for Nevada, there are no licensing requirements or state agencies that regulate qualified intermediaries, or bonding requirements, or financial stability tests.

"Can I use my own bank locally to deposit the net proceeds from the sale of my relinquished property?"

No, if your name is on the account. Yes, if the account actually belongs to the qualified intermediary. However, most intermediaries will insist on using a bank or financial institution close to where they do business or if not close, they will primarily use one, and for good reasons:

1.  Convenience, consistent bookkeeping and an on going working relationship with the same entity and personnel. It would be a nightmare opening, monitoring and closing accounts all over the country especially for intermediaries who do large volumes of business all over the country. This is often of extreme importance because of the time frames Section 1031 imposes on you to perform.

2.  Security, size and return. The financial institutions that we use are very large and secure (or else we would not use them) and generally offer a better return than most smaller community banks. For a very large transaction, even an eighth of a percentage point can make a significant difference.

"I am uncomfortable using an out-of-area intermediary? Do you have a local office?"

From what has been discussed above, you can see that being local is not necessary but being secure and having sound procedures are. A qualified intermediary does not need to meet face-to-face with you just as you can order insurance, financing, travel tickets, or any number of services and products over the phone, by mail or by other electronic means. Often you do not even know where the person is that you are communicating with. It is the same in our industry. You call us to discuss the particulars of your transaction, we provide you a quote, you give us the "okay", you have certain documents faxed to us, we prepare the necessary exchange documents (often the same day), we fax or overnight the documents back for your review with your tax advisor, we communicate with the closing party (escrow, closing attorney, etc.), funds are either wired to our account or to the closing party (depending which phase of the exchange you are completing), and you have a done deal without having to ever meet with us in person. To do it any other way would be terribly inefficient. Only a company doing a couple of exchanges now and then would have the time to meet with each client. Small volume of business means less experience, which means a greater chance of missing a nuance thus ultimately jeopardizing your exchange.

IRS Regulations Regarding Security

Here is an overview of the IRS-sanctioned methods regarding security of funds. If one of these three methods is used by the qualified intermediary to secure or guarantee their obligation to complete the exchange, no actual or constructive receipt shall occur.

A mortgage, deed of trust, or other security interest in property (other than cash or a cash equivalent),

A standby letter of credit meeting specific IRS requirements, or

A guarantee of a third party.

We use the third one...guarantee of a third party. And our "third party" is LandAmerica, the largest group of title insurance companies in the country. Folks, there is no better security in this industry, period. If you do not want to take any chances with your funds and you want to be able to sleep at night and not have to worry whether your funds are safe, we are of the few who can provide you this level of security. Why take chances?

Qualified Intermediary

The term "qualified intermediary" was coined by the IRS in their 1991 Regulations dealing with deferred exchanges. Other terms that are used are: "accommodator", "intermediary" and "facilitator". In the days before delayed exchanges (prior to 1979) the term most commonly used was "accommodator". (See Types of Exchanges for examples, uses and more detail on the use of accommodators.)

A qualified intermediary is a person who enters into a written exchange agreement with the taxpayer to acquire the relinquished property from the taxpayer then sell it to the buyer, and to acquire the replacement property and transfer it to the taxpayer. This agreement must expressly limit the taxpayer's rights to receive, pledge, borrow, or otherwise obtain the benefits of money or other property held by the qualified intermediary.

If the taxpayer transfers property through a qualified intermediary, the transfer of the property given up and receipt of like-kind replacement property is treated as an exchange. This rule applies even if the taxpayer receives money or other property directly

from a party to the transaction other than the qualified intermediary (direct deeding).

A qualified intermediary cannot be either of the following:

1. Your agent at the time of the transaction. This includes a person who has been the taxpayer's employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2-year period before the transfer of property they gave up.

2. A person who is related to the taxpayer or the taxpayer's agent under rules discussed in the code (see your tax advisor for these rules).

An intermediary is treated as acquiring and transferring property if:

1. The intermediary acquires and transfers legal title to the property,

2. The intermediary enters into an agreement with a person other than the taxpayer for the transfer to that person of the property the taxpayer gives up and that property is transferred to that person (direct deeding), and

3. The intermediary enters into an agreement with the owner of the replacement property for the transfer of that property and the replacement property is transferred to the taxpayer (direct deeding).

An intermediary is treated as entering into an agreement if the rights of a party to the agreement are assigned to the intermediary and all parties to that agreement are notified in writing of the assignment by the date of the relevant transfer of property.

Voluntarily Ending

Occasionally, an investor will have started a deferred exchange; they transferred their relinquished property to the buyer utilizing the services of a qualified intermediary, and now the intermediary is holding the net funds while awaiting instructions from the investor as to which property they want the intermediary to acquire for them. For one reason or another, the investor changes their mind and decides not to continue with the exchange. They call the intermediary to request that the exchange be terminated and that the intermediary returns the unused funds. Most often they will even let the intermediary know that they realize that they will have to pay the taxes once they receive the funds and offer to put their request in writing to the qualified intermediary thinking this will protect the intermediary in some way. Here's the big question: Can the intermediary return the funds?

The IRS states in their 1991 1031 Regulations under what conditions the funds can be returned. There are only three conditions:

1.  At the end of the Exchange Period (midnight of the 180th day from the date of the transfer of the first relinquished property), or

2.  At the end of the Identification Period (midnight of the 45th day from the date of the transfer of the first relinquished property) if no replacement properties are identified within that Identification Period or any identified properties are properly revoked before the end of the Identification Period, or

3.  After the 45th day and before the end of the Exchange Period if all the identified properties have been acquired.

That's it. The code allows for no exceptions to this. If the investor changes their mind after the 45th day and still have properties identified, they legally can not get their funds back until after the 180th day...even if they are willing to pay the taxes! Their willingness to pay the taxes makes no difference. The qualified intermediary is bound by the law and the exchange agreement. They are not holding the taxpayer's money unethically or illegally. In fact, they are holding it ethically and legally by consistently abiding by the 1031 rules and the exchange agreement for each investor.

Fortunately for most and unfortunately for a few, we abide by these rules.

Misconceptions

As with any subject there are "common" misconceptions. Unfortunately, misconceptions involving the tax code can lead to a disallowance and a major financial loss. Regarding misconceptions with Section 1031 exchanges, there are several things that are very alarming: 1) many have been perpetuated for decades, 2) even with readily available information derived from court cases, many errors are still committed, 3) many qualified intermediaries and other "experts" are perpetuating the errors (a perusal of other websites recently has born this fact out). Below are a few of the ones that we hear the most.

This first one probably comes from trying to figure the tax code out by oneself. (It is impossible to read the code and figure it out!) The question is asked something like this, "I want to defer my taxes and do a 1031 exchange but what if I want someone's property but they don't want mine?"...or "What if someone wants my property but I don't want theirs?"

In the early years of 1031 exchanging a straight two-way swap was all that anyone knew to do and if you have read the code you too would probably think the same thing. But as time went by the courts generally took a fairly liberal view of the code and allowed various types of exchanges as long as they met the basic spirit of the code. Although they are certainly still allowable, two-way exchanges are not very probable.

Generally, today's 1031 exchanges involve at least three parties, are far more flexible and start off identical to a normal sell-then-buy transaction, however, they can be far more complicated as well. (Read "Types of Exchanges" later to learn all of the many different ways you can do an exchange. It may surprise you!)

Another misconception is in regards to "like kind". Again, if you only read the code, you would think that like kind probably meant a hotel for a hotel, an apartment for an apartment, land for land, etc. Certainly these examples are valid; however, a hotel is like kind to an apartment which is like kind to a shopping center which is like kind to an office building which is like kind to a nursing home. In fact, raw land is like kind to all of these. That's right. No matter what you have heard or read before, land is like kind to improved property (and it is not a new rule). See Like Kind under FAQ's for a more thorough discussion and talk to your tax advisor.

This next misconception is unconscionable because it is usually provided by someone the investor trusts and believes. In fact, the advisor may even say something like, "It worked for me before" or "This is the way we've always done it before" which is totally inane because they may never have been audited. Hopefully you have not heard of the following procedure and are not currently biased. It is when you, the investor, have been advised to do an exchange and you ask how to do it. Your advisor says, "No problem. Just have the title company do it for you." Wrong. Dead wrong. To do a 1031 exchange you need to turn your sales transaction into an exchange transaction. To do this requires proper paperwork before you transfer ownership of any property and strict adherence to 1031 laws and regulations. A title company cannot provide this level of legal representation. They can not provide you an exchange agreement; they are not in the business of practicing law and drafting contracts and giving tax advice. Sure, they may "do" your exchange for nothing, but what are they doing and you actually getting? Your transaction will be disqualified if audited and you will have taxes, penalties and interest to pay. Don't be tempted to do it. You will be playing "audit lotto" if you do and not saving anything...it will cost you! The paperwork can only be acquired from a competent attorney or a qualified intermediary.

Strategies

An investor will make the decision to sell a property for a variety of reasons; too many properties to manage, tenant hassles, repairs and deferred maintenance, desires more cash flow, desires more appreciation, life transitions, relocation and a variety of other reasons. But to sell a property which has a realized gain is a problem of its own, namely, taxes. Generally, there is a real estate solution to each of the problems above. We will discuss some of these solutions in this section called Strategies.

Consolidating-Going nuts trying to maintain too many properties? It's a common problem with a couple possible solutions. One is to hire a competent property manager to handle just about every aspect of your real estate investment. You will have to forfeit a relatively large percent of your profit but the extra time and peace-of-mind might be worth it. Another solution is utilizing the benefits of Section 1031 by consolidating several properties into one, easy-to-manage property. How about a single-tenant-user property with an absolute triple-net lease? A post office? A church? A Jiffy Lube or fast food franchise? When you stop to think about it, there are numerous options.

We had a client once that had somewhere around one hundred single-family rentals. He wanted to get rid of the management headaches and utilize the value of these properties to acquire a ranch in a different state. Over a period of several years, he would set up many deferred exchanges with us as the qualified intermediary, sell as many properties as he could within the given time frame (180 days), we would accumulate and hold the net proceeds from each sale, then he would acquire a fractionalized interest in the ranch. The reason for not acquiring the whole ranch is that he could not later, when he sold more of his single-family properties, exchange into the ranch which he now fully owns; you cannot exchange with yourself. But if there is still a percentage of the ranch that he did not own, when he later sold other properties, he could exchange them into the unowned portion. That is exactly what we did with this client.

Using Section 1031 to consolidate into fewer, easier-to-manage properties is common and an important strategy and generally not too complex. Acquiring a fractionalized interest in the replacement property can be quite complex. We are comfortable and experienced with either solution, however, with either solution, please see a competent tax advisor. They will "save" you money in the long run, not "cost" you money.

Diversifying-There may come a time in an investor's life when it is time to get out of real estate and into cash or other liquid investments. It will take time and will cost some considerable tax dollars but taken a step at a time, the "pain" can be minimized.

Let's assume the investor has been in real estate for the past thirty or forty years and has a very large real estate asset. To sell it at one time could be a very enriching experience...for the IRS...and a major setback for the investor. What if we utilized the benefits of Section 1031 to acquire several no-management, cash flowing properties then over a period of several years, sell these properties off one at a time? By acquiring these smaller properties the investor defers the taxes and maintains a cash flow. Then by selling them off gradually, the investor gets to cash and minimizes the tax bite.

This strategy can be combined with all sorts of other strategies as well. If the investor wants immediate cash, they can pull the needed cash out in the sale of their first property and if the investor has certain qualified losses from previous investments, they can offset the tax on the cash with the losses carried forward. The investor can also set up their estate in such a way that any remaining property at the time of their death go to certain heirs as part of their well thought out estate plan. Again, see a competent tax advisor regarding these strategies but I think you are beginning to see how powerful, flexible and creative 1031 exchanging can be.

Tenants-Although not a common use of 1031 exchanging, we have heard of investors exchanging from one geographical area to another to prevent certain people from being tenants, namely, relatives!

Life transitions-Aging, relocation, divorce, disability, death...these can all trigger the need to change one's investment strategies and utilize Section 1031 to find real estate solutions to the transitional problems. Middle-age investors may want to simplify their investments, older investors may want to start liquidating, people moving from one area to another may feel compelled to keep their investments closer to them, and on and on. Selling real estate, which has a substantial gain, is generally not the first option to solve one's problems.

You can now see how flexible the application of Section 1031 tax-deferred exchanges can be. Next, you are going to learn various methods we have at our disposal to actually structure the exchange for you so you get the end result (substance) you desire.

Types of Exchanges

Were you aware that there are at least eight different exchanges that are sanctioned by the Code, the courts or the IRS? In addition, there are at least four other types that are not sanctioned that some taxpayers are willing to do. Quite a variety to choose from today considering there was only one known type back in the beginning (1921).

In this section, we will discuss many of these various methods of exchanging property: simultaneous, deferred, reverse, construction and personal property. But remember, regardless of the method of doing an exchange (called the "form" of the exchange), to be a defensible exchange in face of an audit or an unlikely court case, you must have your exchange well documented utilizing proper paperwork known as the exchange agreement. The exchange agreement makes the exchange and is provided by a qualified intermediary like The National 1031 Exchange Corporation, an attorney, or us. Without the exchange agreement, there is no exchange! (The only possible exception to this would be the pure two-party swap where Party A wants Party B's property and Party B wants Party A's property. An exchange agreement may not be necessary in this event, however, see your tax advisor!)

Simultaneous

Originally, exchanges were of the two-party type where A wants B's property and B wants A's property. The properties would transfer at the same time ("concurrently" or "simultaneously"). In the 1960's, two different types of simultaneous exchanges emerged and were upheld in tax court in favor of the taxpayers. Today, these methods of doing exchanges are named after the taxpayers in the court cases namely, "Baird" and "Alderson".

Below, we will discuss the basics of two-party and multi-party exchanges.

Two-party Exchange

A pure two-party exchange is certainly the simplest exchange to do and the easiest to document; however, it is the least probable and the least flexible. It is improbable that two parties can be found that wants each other's property. For example, A may want B's property but B doesn't want A's. Because it was the only known way to do an exchange prior to the 1960's, they did occur but not to the extent 1031 exchanges occur today.

With the advent of the three-party exchange, both A and B have an additional, more flexible option. The main drawback to multi-party exchanges is that they can become far more complicated; the more flexibility, the more complexity. Let us explain it this way: A wants B's property, B wants C's property, C wants both D and E's properties, D wants F's and E wants G's and F and G want to cash out. You can see it can quickly become quite complicated as you add more people to the mix. Then when you consider not only different properties and different owners but owners with different needs, motivations and temperaments, with different real estate agents, accountants and attorneys, with properties in different states with different closing practices, and then trying to have all closings "mutually dependent" on the others (all close or none close), the probability of ever closing quickly goes down. (Today the easiest way to close one of these is to do a deferred exchange, discussed in an upcoming section.)

Four Necessary Components

Four of the most critical fundamentals needed to complete a multi-party simultaneous exchange are:

1.  An exchange agreement,

2.  An accommodator,

3.  Like for like properties, and

4.  No actual or constructive receipt of net proceeds.

Below are the basics for completing three different types of simultaneous exchanges. For each example, let's use these simple facts:

Party A is our taxpayer desiring to do an exchange of the A property (known as the "relinquished property"). Party A wants to acquire the B property (known as the "replacement property") from Party B. But B does not want A's property. B wants cash. Additionally, Party C has cash and wants to buy A's property. Here is the problem...if A were to transfer the relinquished property to C for cash then immediately use the cash to buy the B property, the IRS would consider the transaction to be a sale/reinvestment, not an exchange under Section 1031, and disallow the exchange. If challenged in court, the court would agree with the IRS.

Following are two solutions to the above dilemma:

"Baird" Exchange (1962)

This method of completing the transaction utilizes the seller of the replacement property (Party B) as the accommodator. On the day of closing, A will transfer the relinquished property to B, the replacement property owner, in exchange for the replacement property. Party A has what they want, however, Party B has the relinquished property, which B does not want. Simple. All B has to do now is sell the A property to C for cash. In other words, as an accommodator, B will receive the A property temporarily then sell the A property to the pre-arranged buyer, Party C. In this way, B receives the cash directly from C and A has no actual or constructive receipt of the funds.

A quick review of the end result (the "substance") shows you that A receives the replacement property, B receives the cash and C receives the A property. Interestingly, the substance of a 1031 exchange is identical to the substance of a sale/reinvestment! It is the structure (the "form") of the transaction that is different. And the form is directed by the paperwork that is used.

"Alderson" Exchange (1963)

This method of completing the transaction utilizes the cash buyer (Party C) of the relinquished property as the accommodator. On the day of closing, C will buy the replacement property from B with cash. B has what they want (cash), however, C does not want the replacement property, C wants the relinquished property. Simple. A exchanges the relinquished property with C for the replacement property.

Double-checking both the Baird Exchange and the Alderson Exchange to the Four Necessary Components above you will observe that if there is a properly written exchange agreement to dictate the proper form that there will be an accommodator designated, a like for like transfer of property and no actual or constructive receipt of funds by the taxpayer.

Pro's & Con's

As with each method of exchanging, there are going to be pluses and minuses. The pluses are certainly the flexibility provided by introducing an accommodator and a cash buyer to satisfy the replacement property owner's desire for cash. The cons are that it is possible that neither the buyer (C) nor the replacement property owner (B) will cooperate as an accommodator because of fear of possible risks and liabilities of acting as an accommodator. Also, as stated previously, the exchange may not be as simple as three parties but may include many more. The more complex it gets, the less likely it is to ever close.

Today the easiest solution to closing an exchange with a cash buyer is to utilize an accommodator other than the cash buyer or replacement property owner. These exchanges can be closed simultaneously or have the added flexibility of being able to be completed up to 180 days after the transfer of the first relinquished property (keep in mind that there could be many relinquished properties involved in the exchange that transfer on different dates).

Simultaneous Exchange Utilizing a Qualified Intermediary

After a major court case ending in 1979 ("Starker"), corporations have been set up to act as accom- modators (qualified intermediaries). We are one such company. These companies provide the necessary exchange documents and the experienced ones can provide creative solutions and the oversight to simplify even the most complex exchange. In addition, by having us act as the accommodator instead of the cash buyer or the seller of the replacement property eliminates the apprehension of the parties to even participate in the transaction by eliminating many of the potential risks to them.

Completing a simultaneous exchange utilizing a qualified intermediary is extremely simple and cost effective. Assuming the above scenario where the taxpayer (A) wants the replacement property, the replacement property owner (B) wants cash and the cash buyer (C) wants the relinquished property, this is how the exchange would work. On the scheduled date of closing and per the exchange agreement between us (qualified intermediary) and the taxpayer, A would transfer the relinquished property to us and we would sell the relinquished property to C for cash. This cash would then be used to buy the replacement property from B, which we would then transfer to A. This sequence of events would occur on the same day with each step immediately following the other. It may seem like a silly process but it is one that is necessary according to Congress, the IRS and the courts! In other words, these are not our rules but rules we follow in order to provide a service to taxpayers desiring tax deferral. Our service can be performed the same day of the request anywhere in the country.

The Starker court case (1979), mentioned above, actually dealt with a unique set of facts involving two owners of one relinquished property exchanging for fifteen replacement properties over a period of two years. It is from the decision in this case that eventually lead Congress to adopt rules regarding delayed ("deferred") exchanges to be discussed in the next segment.

Delayed / Deferred Exchanges

Today, it is estimated that more exchanges are closed using the deferred exchange method than any other method. The reason is simply flexibility. The law now allows taxpayers to have up to 180 days to close on the replacement property(ies) whereas in the past taxpayers had to close all properties concurrently; if one property did not close, none of them closed.

Deferred exchanges are one of the newer varieties of exchanges evolving from a major 1979 court case named "Starker". Although the way a deferred exchange is structured today is not the same as the Starkers' exchanges, the concepts started with them. Section 1031 was eventually amended in 1984 to allow for these deferred exchanges then in 1991 the IRS finally produced regulations regarding them. It is these Regs that provide the clearest guidelines for doing delayed exchanges today.

According to the IRS...

A deferred exchange is one in which, pursuant toan agreement, the taxpayer transfers property used in business or held for investment and, at a later time, they receive like-kind property they will use in business or hold for investment. The transaction must be an exchange (that is, property for property), rather than a transfer of property for money that is used to purchase replacement property. If, before the taxpayer receives the replacement property, they actually or constructively receive money or unlike property in full payment for the property they transfer, the transaction will be treated as a sale rather than a deferred exchange. In that case, they must recognize gain or loss on the transaction, even if they later receive the replacement property. (It would be treated as if it was purchased.)

Advantages

More completed transactions

Less stress not having to close concurrently

Fewer contingencies; the taxpayer has already disposed the relinquished property prior to acquiring the replacement property

Breaks complex exchanges into simpler parts; especially helpful in multi-property and/or multi-state exchanges

Utilizes the expertise, experience and oversight of a qualified intermediary (although not a substitute for a competent tax advisor regarding tax matters)

Precautions

Time frames and other rules must be strictly adhered to (see Time Frames)

Qualified intermediaries are not generally bonded, regulated or provide assurances (we do!) (see Security of Funds)

Reverse Exchange

A reverse exchange is an exchange in which the taxpayer has the intermediary acquire the replacement property prior to the taxpayer disposing of the relinquished property. This is a newer innovation of exchanging that has received a lot of attention in recent years and solves some unique problems for the taxpayer. However, a word of caution, it is not sanctioned by the Code, the IRS nor the courts. In other words, if you do decide to use this method to do a like kind exchange, there is an unknown element of risk involved. See your tax advisor!

Even for the taxpayers that are willing to do reverse exchanges, most of them never transpire. Why? For several reasons:

1.  We try to find alternative solutions, which are known to comply with the tax code.

2.  The costs to do reverse exchanges are considerably higher.

3.  We insist on the taxpayer being represented by legal counsel.

4.  In order for the accommodator to acquire the replacement property the taxpayer must provide the accommodator with the funds to do so. Often, the funds come from the sale of the relinquished property, which has not happened yet in a reverse exchange.

For those few taxpayers who can and will do a reverse exchange, our company will structure it for them. There are two basic types of reverse exchanges. We call them the "Front-leg" Reverse and the "Back-leg" Reverse exchanges. First, here is a classic scenario for a reverse exchange then we will discuss the basics of each type.

The taxpayer wants to dispose of their relinquished property and acquire the replacement property, in a tax-deferred exchange. The problem is that the replacement property owner will not or can not extend the time for the taxpayer to acquire the B property and the taxpayer has not sold their relinquished property yet.

Front-leg Reverse Exchange

Through the services of an intermediary, the taxpayer will loan the intermediary the necessary amount of money to acquire the replacement property. Immediately after acquiring the replacement property, two things are going to happen "simultaneously":

1.  The intermediary will transfer the replacement property to the taxpayer, and

2.  The taxpayer will transfer the relinquished property to the intermediary. In theory, this is where the like for like exchange takes place, between the intermediary and the taxpayer.

Now the intermediary holds legal title to the relinquished property until a buyer for it is ready to buy it from them. Once the buyer buys the relinquished property from the intermediary, the intermediary uses the net proceeds to pay off the loan to the taxpayer.

Back-leg Reverse Exchange

Again, through the services of an intermediary, the taxpayer will loan the intermediary the necessary amount of money to acquire the replacement property. This time, instead of immediately transferring the replacement property to the taxpayer, the intermediary holds the replacement property until a buyer is ready to close on the relinquished property. At that time, three things are going to happen:

1. The intermediary will exchange the replacement property with the taxpayer for the relinquished property.

2. The intermediary will sell the relinquished property to the buyer.

3. The intermediary will use the net proceeds from the sale of the relinquished property to pay off the loan from the taxpayer.

Risks

The risks are numerous not the least of which is the risk that the exchange could be challenged. But there are risks to the intermediary as well (which is why the costs to do these are substantially higher than the normal delayed or simultaneous exchanges). Here is a list of potential risks to the intermediary:

1. The intermediary takes legal title and holds either the relinquished property (in a Front-leg Reverse) or the replacement property (in a Back-leg Reverse).

2. Future lawsuits between the parties could involve the intermediary because the intermediary entered into the chain of title.

3. Several additional contracts must be drafted such as a loan document, a management agreement and a lease agreement.

If the taxpayer can not find a buyer within an agreed amount of time, the intermediary has the option to terminate the exchange and hand over to the taxpayer whichever property the intermediary is holding.

Of the two types of exchanges above, the one we prefer is the Front-leg Reverse Exchange. Call us if you are interested and we will explain why.

A Third Type of Reverse Exchange

This is definitely not one you would want to do; however, there are intermediaries who structure the reverse exchange this way. They do this to minimize or even eliminate all the risks to themselves. However, this maximizes the risks to you, the taxpayer! A bit unfair, don't you think?

Here's how it works:

Once again, through the services of an intermediary, the taxpayer will loan the intermediary the necessary amount of money to acquire the replacement property. Similar to a Front-leg Reverse, the intermediary immediately causes the replacement property to be transferred to the taxpayer. This time, however, the taxpayer does not exchange the relinquished property to the intermediary. The taxpayer has possession of both properties! Imagine that.

Construction Exchange

Let's say you want a property but in its current state it is not valuable enough to do a fully tax-deferred exchange. In other words, if you were to acquire it you would be trading down and have a tax consequence as a result. Once again, here is a situation where a competent and experienced qualified intermediary can be invaluable by providing solutions and assistance. What we would do is acquire the property for you, put the improvements on it while we are holding it (per your specifications), and transfer it to you within 180 days of when you disposed of your first relinquished property. Sound familiar? You must follow the rules of a typical deferred exchange in addition to a new set of rules discussed below.

Let us go through this again and add the necessary information as we go. First, the taxpayer disposes of their relinquished property utilizing our services (few qualified intermediaries are willing to or capable of doing these exchanges). We immediately sell the relinquished property to the buyer and use the net proceeds to acquire the replacement property. But here are the first two major differences: 1) we actually acquire the replacement property through a new corporation (a "single-purpose entity") for liability purposes, 2) this entity holds on to the replacement property and puts on the improvements. Consequently, the taxpayer must now abide by the rules of the typical deferred exchange. In addition, the IRS imposes additional rules for the acquisition of the replacement property.

From the IRS website...

Replacement property to be produced. Gain or loss from a deferred exchange can qualify for nonrecognition even if the replacement property is not in existence or is being produced at the time you identify it as replacement property. If you need

to know the FMV of the replacement property to identify it, estimate its FMV as of the date you expect to receive it.

To determine whether the replacement property you received qualifies as like-kind by being substantially the same as the property you identified, do not take into account any variations due to usual production changes. Substantial changes in the property to be produced, however, will disqualify it as like-kind property.

If your identified replacement property is personal property to be produced, it must be completed by the date you receive it to qualify as like-kind property.

If your identified replacement property is real property to be produced and it is not completed by the date you receive the property, it may still qualify as like-kind property. It will qualify as like-kind property only if, had it been completed on time,the property you received would have been considered to be substantially the same as the property you identified. It is considered to be substantially the same only to the extent the property received is considered real property under local law.

However, any additional production on the replacement property after you receive it does not qualify as like-kind property. (To this extent, the transaction is treated as a taxable exchange of property for services.)

Receipt requirement. The property must be received by the earlier of:

The 180th day after the date on which you transfer the property given up in the exchange, or

The due date, including extensions, for your tax return for the tax year in which the transfer of the property given up occurs.

You must receive substantially the same property that met the identification requirement, discussed earlier.

IRS Website regarding tax-deferred transactions

http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p5440105.htm

Ariel Photos

Forms

Public Records

1031 Exchange

Title Rates

Topo Maps

Useful Links

Home