There are numerous types of 1031 exchanges possible.

• Simultaneous
• Delayed
• Improvement and Construction
• Reverse
• Business and Personal Property
• Partnership

Simultaneous

Prior to 1984, when Congress modified the Internal Revenue Code on exchanges and formally approved the Starker concept of delayed exchanging, virtually all exchanges were of the simultaneous type. To qualify as a simultaneous exchange, both the relinquished property and the replacement property must close and record on the same day.

Delayed

In a delayed exchange, the relinquished property is sold; after a delay of up to 180 days a replacement property is acquired. There are time constraints and rules which must be followed for the transaction to be allowed.

Improvement and Construction

In some cases construction or improvements can be accomplished as part of the exchange process, with payments to contractors and other suppliers being made by the Intermediary out of funds held in a trust account. The improvement or construction costs can bring the value of the replacement property up to an exchange level which would allow the transaction to remain tax free.

Reverse Exchanges

The investor finds a replacement property and wants to acquire it before he sells his relinquished property. Since the exchangor cannot buy the property and later exchange into property that he already owns, he must find a surrogate buyer to acquire the replacement property.

Business and Personal Property exchanges

Internal Revenue Code Section 1031 allows the exchange of many types of property other than Real Estate. While the basic exchange rules are the same, certain complications arise in classifying the non-real estate assets into one of several categories so that they meet the like-kind requirements of the regulations.

Partnership exchanges

If every individual or entity within a partnership elects to have his individual interest treated as his or her own real property interest, similar to a tenant in common interest, then that individual interest can qualify to be exchanged under §1031. And since that partnership interest can qualify for deferred gain treatment, the amount realized from the sale of that interest, can be used to acquire any qualifying replacement property. Therefore, an interest from a partnership in which all partners have made individual elections under §1.761-2(a) can be exchanged for any other property.

Disclaimer: The information contained at this site is solely provided for information purposes and does not create a business or professional relationship. This web site is intended to provide basic information about I.R.C. Section 1031 tax-deferred exchanges and does not contain legal advice and may not be relied upon for your specific situation.  You must consult with your personal attorney, CPA or financial advisor.