Our Services

1031 Facilitators, Inc. will assist you with any type of exchange: Forward, Reverse, or Improvement. Each type is briefly explained below. If you need help with an exchange, please call us at 956-546-1031, or email us.

To achieve your tax deferral, you must reinvest in like kind property. Any property considered real estate under the laws of your state will be like kind to any other real estate. In Texas, an exchange of a condominium for water rights or an exchange of an oil well for an interest in a long-term lease would both meet the like kind requirement.

As a result of changes made to Internal Revenue Code, in December 2020 The Internal Revenue Service published guidance defining real property and further expanding your reinvestment possibilities. Items like airspace, leaseholds, easements, windmills, options to acquire land and many other items are now considered to be real property eligible for reinvestment under IRC§ 1031.

Additionally, both the old and new properties must be used for business or investment purposes. This means that your principal residence cannot be used in an exchange nor can you acquire property that you intend to resell immediately.

This is the standard transaction where your property is sold and the proceeds are reinvested in a new piece of property. For more details about the transaction see our engagement letter and related exchange agreement below.

Within 45 days of the sale, you must identify the potential replacement properties to us. Your identification must be in writing and must clearly describe the properties. You may identify up to three properties within the rules, but if you need to identify additional properties please call us and we’ll explain the two exceptions (the 200% rule and the 95% rule).

You must acquire one or more of the identified properties within 180 days of the sale. In the event that the 180 day period starts in one tax year and ends in another, we recommend that you request a filing extension for your federal income tax return since replacement property must be acquired prior to the due date for your return.

LIKE KIND PROPERTY USED FOR BUSINESS OR HELD FOR INVESTMENT

FORWARD EXCHANGE

A reverse exchange is sometimes required where properties are unique or when the local real estate market is hot. We attempt to avoid this type of exchange whenever possible since it is more complicated and expensive. In the reverse exchange, your replacement property is acquired prior to the sale of your existing property. There are two types of reverse exchanges depending on whether the replacement or relinquished property is “parked” by the qualified intermediary. Both of these transactions can be accomplished under specific regulations, but in this case you would have 45 days to identify the property to be sold and 180 days to sell it. (Both periods start from the date of the initial transaction.) We will form a single member limited liability company to hold the parked property and will convey this company to you at the end of the exchange.

If you need more than 180 days to complete the transaction, this may be possible with a “non-safe harbor” exchange. This exchange will require assistance from legal and tax specialists and brings both additional cost and risk to the exchange.

In an Improvement Exchange the Qualified Intermediary will acquire a property and either (1) make improvements to it or (2) construct a building on it. It is usually a challenge to make this work within the 180 day time frame required by the regulations, so planning for this exchange must start as early as possible. In order to get the tax deferral, it is not necessary that all improvements be complete at the 180 day mark. Deferral will be achieved so long as your proceeds have been reinvested in bona fide construction.

We’ll form a single member limited liability company to hold the improved property and we’ll be continuously involved so this transaction will be more expensive than a forward exchange. In addition to the normal risks, this type of exchange adds risk from weather, permitting/zoning, contractor scheduling and material availability.

REVERSE EXCHANGE

IMPROVEMENT EXCHANGE

Downloadable Files

Download the Exchange Agreement here

Download the Engagement Letter here