More About 1031 Exchange

"Like-Kind" Property

Personal Property

Starting January 1, 2018, all personal property assets (such as autos, trucks, heavy equipment, farm machinery, artwork, collectibles and intangibles like fast-food restaurant franchise licenses) will no longer qualify for Section 1031 tax-deferral treatment. The very good news is that there will be no changes in the tax code for like-kind exchanges of real estate.

1. The Tax Deferred Exchange
2. Exchange Terminology
3. Like-Kind Property
4. Delayed Exchange Deadline
5. Vesting Issues
6. Tax Season Issues
7. Boot
8. Exchange Closing
9. Safe Harbor Limitation
10. Foreign Property
11. Related Parties Issues
12. Disqualified Party Issues
13. TIC Ownership

Role of the Real Estate Broker
2. Your Attorney as Accommodator
3. Role of the Escrow Company
4. Non-Tax Reasons for Exchange
5. Exchange Vocabulary
6. Exchange Addendum
7. IRS Rules and Regulations
8. Initiating the Exchange

Delayed Exchangee
2. Simultaneous Exchange
3. Build-to-Suit Exchange
4. Reverse Exchange
5. Mix Use Exchanges
6. Personal Property Exchange
7. Other Interests in Real Property
8. Installment Land Sales Contracts
9. Refinancing Issues
Seller Finanacing
10. Exchanging Partnership
11. LLC &REIT Issues
12. Legal Disqualified Issues

With a changing market, many investors are looking at their
options when exchanging. The four ways to 1031 exchange are:
Delayed Exchange Sell a property, then buy
Reverse Exchange Buy first, then sell
Construction Exchange Sell, then build or improve
Simulataneous Exchange Buy and sell concurrently

45 Days from close of escrow - All potential replacement
property must be identified in writing, by midnight of the 45th
day.
180 Days from close of escrow- The replacement property
or properties must be acquired and escrow closed on or before
midnight of the 18oth day of the closed escrow of the initial
property.

Identification of all potential replacement property is required
on the 45th day of the Exchange. Identification must be in
writing and the description of the properties must be
unambiguous. The IRS provides three rules for
identifying replacement property:
The3 Property Rule- The 3 Property Rule allows for
identification of any three properties, of any price, anywhere
in the United States.
The 200% Rule - The 200% Rule is an option for identifying
more than three properties, providing the combined value ofall
properties does not exceed 200% of the property sold.
The 95% Rule - The 95% Rule allows for identification of any
number of properties, without regard to the value, providing 95%
of said identifies values will be purchased.

Basic Steps for 1031 Excahnge

Include the Exchange Cooperation Clause as an Addendum and/or part of the Purchase or Sale Agreement.

Select a Qualitied Accommodator

At close of escrow signs HUDI of the relinquished property. This can be done by facsimile or PDF.

Within 45 days after close of escrow Exchanger must notify Accommodator in writing of potential replacement properties.

Within 180 days after close of escrow Exchanger must close escrow on one or more of the replacement properties.

5 Types of 1031 Excahnge

I. Simultaneous Exchange

Initial property is sold and replacement property is purchased at the exact same time and at the
same Escrow Office. This is the original type of 1031 exchange. The simultaneous exchange can be logistically difficult to accom-
plish, especially with a complex transaction involving properties in different cities or states. Due to the nature of the transaction
only one party in the transaction can do a 1o31 exchange.

2. Delayed Exchange

Property is sold and replacement property is purchased within 180 days. Replacement property must be
identified within 45 days. Because of the 180 day window this is the most popular type of 1031 exchange.

3. Improvement Exchange

Also known as a Construction or Build-to-Suit Exchange. In order to have a completely tax
deferred transaction, the Exchanger must trade "across" or "up" in equity and debt. If the Exchanger goes down in value when
acquiring the replacement property he/she will have a tax liability on the cash or mortgage boot. By making improvements to
the property the Exchanger can defer the tax liability.

4. Reverse Exchange

The replacement property is purchased before the initial property is sold. This is an option when the
Exchanger must close on the eplacement property before a Buyer has been found for the relinquished property.

5. Personal Property

Exchange- The sale of one asset and acquisition of the same type of asset within 180 days. The key word is
type of asset. One method of determining the type of asset is using the SIC (Standard Industrial Classification) codes. The
"types" become anything in that same group.

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