SIMULTANEOUS EXCHANGE

            Just as the name implies, this exchange occurs when the relinquished and replacement properties close on the same day, usually back-to-back.  There is no interval of time between the two closings.  The Intermediary assures that the Exchanger does not have constructive receipt of funds and that properties are transferred by the escrow/closing agent to the proper entities.

DELAYED EXCHANGE

            This is the most common type of exchange where the Replacement Property is closed on at a later date than the Relinquished Property closing.  This exchange is subject to strict time frames for the completion (the 45-day and 180-day clocks). The Exchanger must identify replacement property within 45 calendar days of the close of the relinquished property and exchange rules provide up to 180 days to purchase replacement property once the relinquished property is sold.   The use of a Qualified Intermediary is required to facilitate a valid delayed exchange.

IMPROVEMENT EXCHANGE

            The Improvement or Construction Exchange allows the taxpayer to build on, or make improvements to, the replacement property using the exchange proceeds.  These improvements are made prior to the Exchanger receiving the property as the “Replacement Property”.  The Code and Regulations do not permit a taxpayer to construct improvements on a property as part of a 1031 Exchange after he has taken title to the property as Replacement Property in an exchange.  It is therefore necessary for the Intermediary to close on, take title and hold title to the property until the improvements are constructed and then convey title to the improved property to the taxpayer as Replacement Property,   Depending on circumstances, an improvement exchange can be done in the context of both Delayed Exchanges and Reverse Exchanges.  This type of exchange is also subject to the 45 and 180 day time restrictions.  Improvements must be completed and title conveyed prior to the end of 180 calendar days from the close of the relinquished property.

REVERSE EXCHANGES

            In a Reverse Exchange, the replacement property is acquired prior to the sell of the relinquished property.  In most situations, the Intermediary takes title to the Replacement Property and holds title until the taxpayer can find a buyer for his Exchange Property and close on the sale under an Exchange Agreement with the Intermediary.  Subsequent to the closing of the Exchange Property (or at the time of the closing) the Intermediary conveys title for the Replacement Property to the taxpayer.  Effective September 15, 2000, the IRS recognized reverse exchanges and issued “safe-harbor guidelines which follow the same time frames (45 and 180 days) as for other types of exchanges.