Real Property Exchange
Real Property is like kind to other real property. Therefore raw land, business real estate, rental or income property, or a lease-hold interest whose duration is 30 years or more can all be exchanged for each other.
Delayed or Forward Exchange
The taxpayer relinquishes the currently owned property first and then acquires the replacement property second. Both must be accomplished in 180 days through the services of a Qualified Intermediary. The first 45 days are an identification period wherein the taxpayer formally identifies the property to be acquired in the exchange.
Similar to the delayed exchange except that the taxpayer acquires the replacement property first and then sells off the relinquished property during the 180 day period that follows. The replacement property selected by the taxpayer must be a new acquisition. Therefore the EAT “exchange accommodation titleholder” will hold title to one of the properties during the exchange in order for the taxpayer to receive a new property after his relinquished property is sold.
Build to Suit or New Construction Exchanges
An exchange wherein the EAT “exchange accommodation titleholder” holds title to the replacement property during the exchange in order to fund improvements to the property before the taxpayer receives it. In this way the taxpayer receives the value of the land and the improvements when he takes possession of the property at end of the exchange.
The purest form of exchange where the taxpayer relinquishes property and takes title to the replacement property on the same day. In recent years it has become increasingly challenging to close on two properties simultaneously. These exchanges usually have constructive receipt problems and many times are disallowed. By enlisting the services of a Qualified Intermediary the taxpayer can take advantage of the Safe Harbor provisions of the 1031 regulations and avoid the risks associated with the simultaneous exchange.