1031 EXCHANGE SERVICES
Starker Services, Inc. is the nation’s oldest and most experienced independent Qualified Intermediary firm.
Formed following the landmark Starker tax court decision, our sole function is to provide highly trained professionals and Certified Exchange Specialists® to discuss exchange strategies and prepare the accurate documentation needed to support all forms of tax deferred exchanges, including delayed, simultaneous, reverse and construction exchanges. Read More>
Types of 1031 Exchanges
The Delayed Exchange or “Starker Exchange”
Simultaneous 1031 Exchange
Reverse 1031 Exchange
(Title Parking Arrangement)
This type of exchange allows for the taxpayer to acquire a property prior to the sale of the relinquished property. Revenue Procedure 2000-37 published by the Internal Revenue Service on September 15, 2000, provided the first safe harbor for taxpayers wishing to utilize this exchange structure. In a Reverse Exchange, the replacement property closes before the client’s relinquished property closes.
There are two formats for completing a Reverse exchange. Because the taxpayer cannot own both properties at the same time, the Qualified Intermediary (“QI”) acting as an Exchange Accommodation Titleholder (“EAT”) must hold title to either the replacement property or the relinquished property while a buyer is found for the relinquished property.
Once a buyer can close on the relinquished property and prior to the 180-day completion deadline, the reverse exchange is completed with the Exchange Accommodation Titleholder transferring title to the taxpayer.
- There are many reasons it may be advantageous or necessary to purchase and close on replacement property prior to selling. The investor may have located a replacement property and does not want to lose the opportunity.
- Perhaps a seller is not willing to accept an offer contingent on the sale of the investor’s property.
- Or a business owner may need time to make improvements to the new property to suit the business needs, so it is move in ready when the relinquished property closes.
There are many investment and practical reasons to contemplate using the Reverse exchange format. It is frequently used in combination with another form of exchange such as a Reverse/Improvement exchange. The Reverse exchange is more complex and requires prior consultation with the QI and coordination with the taxpayer’s tax and/or legal advisors.
Construction 1031 Exchange (also known as Improvement or Build-to-Suit)
Multi-Property and Multi-Party 1031 Exchanges
An investor can exchange out of one property and purchase multiple replacement properties or consolidate their real estate investments by exchanging out of more than one property and purchase a larger property. Attention must be paid to the different timelines from each property relinquished and the corresponding identification rules to balance the exchange. Two or more investors that own a property together as tenants-in-common can exchange into their own separate replacement properties. Attention must be paid to how title is held to maintain the continuity of ownership required by IRS guidelines.
Personal Property 1031 Exchanges
The 2017 Tax Cuts and Jobs Act (“TCJA”) eliminated personal property exchanges under IRC §1031 as of January 1, 2018. There are now significant changes to tax treatment of these personal property assets. Investors should consult with their tax advisor when contemplating a sale of business personal property.