Types of 1031 Exchanges
Simultaneous Exchange - When properties are exchanged on the same day.
Delayed Exchange - The most common type, 3 parts:
- Sale of relinquished property
- Identify new property, or properties. (45 days) 3 Property Rule: 3 properties no matter what the fair market value 200% Rule: Any number of properties as long as the aggregate fair market value does not exceed 200% of the fair market value of all the relinquished properties; 95% Rule: Any number of properties without regard to value - provided 95% of the value of the identified properties are acquired
- Purchase of replacement property (180 days) must be one or all of previously identified replacement properties. Taxpayer assigns the purchase contract to Qualified Intermediary who purchases replacement property with the exchange proceeds and facilitates the transfer of property by way of a direct deed from the seller.
Build-to-Suit Exchange - Option to use some or all of exchange proceeds for construction of a replacement property or major improvements to a replacement property. Construction to be included in the exchange must be built and paid for prior to the transfer of the property to the taxpayer. The 45 day timeframe applies and the desired improvements for the replacement property have to be designated.
Reverse Exchange - Exercised when the replacement property has to be purchased before the relinquished property is sold. 45 days to designate relinquished property, and 180 days to complete the transaction. Can be complex and as always, an expert QI should be sought out before beginning the transaction.
It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.
Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving the South Jersey* area. Steve specializes in;
- All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.
- Reverse Mortgages for seniors age 62 or older.
- Equity Management strategies for high-end homes and high net worth individuals.