Exchange Resource Group/EquipEx is a Qualified Intermediary (QI) firm dedicated to facilitating successful, safe and secure Section 1031 Like-Kind Exchanges for our clients. We deliver unsurpassed service and expertise. Our full-time team of six people has nearly 100 years of combined QI experience: we’re big enough to skillfully handle any 1031 Exchange scenario and small enough to care about delivering a top-notch client experience.
The IRS, through Section § 1031 of the Internal Revenue Code or IRC, permits 1031 Tax Exchanges for nearly all types of real property (real estate) that is “held for productive use in trade or business or for investment,” including:
• Commercial office buldings
• Retail centers
• Industrial and warehouse buildings and complexes
• Rental properties: homes, apartments, condominiums, student housing and more
• Water and mineral rights (as applicable per state law)
• Leasehold interests greater than 30 years in length
• Raw land and easements
There are several different types of 1031 Exchanges allowable within the Tax Code:
Straight 1031 Exchange
Also known as a Deferred or Forward-Delayed Exchange, a Straight Exchange is the most common type of 1031 Exchange. The Exchanger first relinquishes (sells) property, then has 45 days to: A) acquire (buy) replacement property; or B) identify property to buy, within certain constraints, thereby typically gaining an additional 135 days to acquire any or all of the properties identified.
Overview of a Typical, Straight Section 1031 Like-Kind Exchange
Step 1: You, the Exchanger, enter into agreement with ERG/EquipEx, your Qualified Intermediary (QI), when selling one or more properties (assets). Instead of paying capital gains, income tax and/or depreciation recapture on the proceeds, you defer that tax exposure, possibly indefinitely.
Step 2: The QI accepts the proceeds from the sale on your behalf and holds them in a Qualified Escrow Account dedicated solely to your Exchange. One of the keys to a successful 1031 Tax Exchange is that you never take possession of the money – it’s received, held and disbursed by the QI, all with your advanced, written authorization and oversight for your protection.
Step 3: You initially have 45 days from the sale date to complete your Exchange by acquiring one or more like-kind replacement properties. If additional time is needed, you may complete an “Identification Step” within the 45 day “Identification Period”, for one or more replacement properties that you’re considering for acquisition, and gain an additional 135 days to acquire any or all of the properties identified. Thus, you normally have a total Exchange window of 180 days.
Step 4: Upon your instruction and written authorization, ERG/EquipEx prepares and provides documents for your replacement property closing(s), and distributes your 1031 Exchange proceeds to closing escrow. Once all funds have been applied to your replacement asset purchases, or the allowable Section 1031 timeframes have elapsed, your 1031 Exchange closes and any non-reinvested funds are returned to you (and become potentially taxable as “boot”).
Step 5: Your tax professional files Form 8824 with your tax return, which details the Exchange, including the transfer of basis from the asset(s) relinquished to those acquired.
Improvement 1031 Exchange
Also known as Construction or Build-to-Suit Exchanges, this structure allows an Exchanger to use some proceeds from the sale of one or more properties to acquire replacement property and some proceeds for new construction, improvements and/or repairs on the replacement property. This type of Exchange is more involved: an Exchange Accommodation Titleholder (EAT) is required and oftentimes a Construction Management Agreement and/or Master Lease is utilized as well. Such Exchanges may be Deferred or Reverse in nature, and depending on the structure of transactions, more than the standard 180-day Exchange Period may be allowable.
Reverse 1031 Exchange
Valuable when the Exchanger wishes to acquire new property in advance of relinquishing old property, the “Reverse Exchange” is also somewhat complex – in terms of process and transfer of ownership – but can be extremely valuable when timing is an issue.
Simultaneous or Direct 1031 Exchange
The Exchanger sells and buys properties on the same day – no money is held in Qualified Escrow.
Which type of 1031 Tax-Deferred Exchange is right for you? That depends on what you want to sell, what you want to buy, what the market is like for buying and selling your particular properties, and the timing that would most benefit you or your organization. For more information or to schedule a free 1031 consultation, please call (303) 579-5545, or email .
Would you like to know more about 1031 Exchanges? Click here for our 1031 Exchange FAQs.
EquipEx is located in the Denver metro area, offering Qualified Intermediary services to U.S. taxpayers of all shapes & sizes, residing anywhere in the U.S. or abroad.