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1031 Exchange Basics

Economic Advantages
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A 1031 tax deferred exchange allows investors the ability to defer the capital gains tax associated with the sale of business or investment.

Real Estate can be an effective way to preserve and create wealth through a reinvestment of “like-kind” property. The various requirements to comply with and time deadlines to meet set out by the Internal Revenue Code and the various regulations make a 1031 Exchange complex, so the support of an experienced Qualified Intermediary is important.

At Exchangers Ltd. We have been helping investors, farmers and developers with 1031 exchanges for all kinds of commercial and investment property, farms, vacant land, and even aircraft. With over 28 years of experience and continuous training, we possess the skills, knowledge and expertise needed to assist you with a 1031 Exchange and ensure it is structured properly.


The Types of 1031 Exchanges
There are various types of 1031 exchanges, and it is helpful to know the purpose of each of them when you are planning to sell a property.  Each requires a different approach and structure.  Knowing the options can help you decide how to best structure your transaction to maximize the benefits.

Forward Delayed Exchange

The forward delayed exchange is by far the most common of the 1031 exchanges. A property, referred to as the relinquished property, is sold. Another property, referred to as the replacement property, is then purchased. The replacement property must be identified within 45 days of the closing on the relinquished property.  The closing of the replacement property must occur within 180 days of the relinquished property closing.  To ensure that the exchange happens within the designated time frames, and otherwise qualifies, it is a requirement to have the sale proceeds held by a ‘Qualified Intermediary’ between the sale and the purchase of the new property.

Reverse Exchange

The reverse exchange occurs when the replacement property is purchased prior to the relinquished property being sold. An Exchange Accommodation Title Holder is used to hold the replacement property until the relinquished property is sold. The entire transaction must be completed within 180 days of the purchase of the replacement property. In certain circumstances, a forward exchange and reverse can be combined to provide some additional flexibility.

Construction Exchange

A construction exchange is a little unique in comparison to some of the other 1031 exchanges. It is also referred to as a “build to suit” exchange. With this exchange, one uses the funds from the sale of the relinquished property for the purpose of constructing improvements on the replacement property that is purchased. An Exchange Accommodation Title Holder holds the property on which improvements are being made and enters into a contract for the improvements to be built.  As with the other exchanges, completion must be within 180 days.

​Simultaneous Exchange

A simultaneous exchange, sometimes referred to as a two-party exchange, happens when two properties are swapped simultaneously. Also, a simultaneous exchange can occur when a property is sold and a new property is purchased on the same day. This type of exchange is not very common.
Regardless of what 1031 exchange you wish to make, there are options available to you. Contact us today for more information to learn which one is right for you.

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