1031 Exchange Services
This short article will supply you with an extremely short and succinct overview of Build-To-Suit 1031 Exchange transactions. Build-To-Suit 1031 Exchange structures are likewise described as Improvement 1031 Exchanges or Construction 1031 Exchanges. These 3 names all describe the exact same 1031 Exchange strategy that allows you to use the profits from the sale of your given up residential or commercial property to purchase your replacement residential or commercial property however also pay for to enhance your acquired replacement residential or commercial property.
Build-To-Suit 1031 Exchange deals are complex tax-deferred techniques. You should constantly look for the recommendations of your legal and tax counsel before participating in any Build-To-Suit Exchange transaction. Exeter 1031 Exchange Services, LLC is always available to work with you and your consultants in preparing your Build-To-Suit 1031 Exchange.
Build-To-Suit 1031 Exchanges
The Build-To-Suit Exchange enables you to structure a 1031 Exchange deal where you can sell your given up residential or commercial property and utilize the earnings from the sale of your relinquished residential or commercial property to acquire replacement residential or commercial property. It likewise allows you to use any excess sale continues to enhance the acquired replacement residential or commercial property as part of your 1031 Exchange deal.
The profits from the sale of your given up residential or commercial property that are utilized towards the acquisition of your replacement residential or commercial property in addition to those proceeds that are paid or utilized for improvements to your replacement residential or commercial property will certify for tax-deferred exchange treatment provided the transaction is structured properly as a Build-To-Suit Exchange.
Build-To-Suit 1031 Exchanges are structured as either a Forward Exchange or a Reverse Exchange. These are significantly more complicated 1031 Exchange transactions and should only be administered by a Certified Intermediary, such as Exeter 1031 Exchange Services, LLC that has substantial experience and expertise with Build-To-Suit Exchanges.
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Build-To-Suit Exchange With a Forward 1031 Exchange
Forward 1031 Exchange transactions can be structured to take advantage of the Build-To-Suit 1031 Exchange technique. This combined 1031 Exchange technique enables you to sell your given up residential or commercial property initially and after that subsequently determine and obtain replacement residential or commercial property in addition to make improvements to your replacement residential or commercial property as part of your 1031 Exchange deal.
The identification of the replacement residential or commercial property and the improvements to be made to the obtained replacement residential or commercial property, in addition to the real closing on the replacement residential or commercial property, should be carried out and completed within the recommended 1031 Exchange deadlines.
Build-To-Suit Exchange With a Reverse 1031 Exchange
Reverse 1031 Exchange transactions can likewise be structured to take benefit of the Build-To-Suit 1031 Exchange method. This combined Reverse and Build-To-Suit 1031 Exchange strategy permits you to acquire your replacement residential or commercial property initially and also enhance the acquired replacement residential or commercial property throughout the time that you're trying to sell your existing relinquished residential or commercial property.
The improvements that are to be made to the obtained replacement residential or commercial property, in addition to the real transfer of the replacement residential or commercial property with the completed enhancements to you from the Exchange Accommodation Titleholder (see comments below), need to be performed and finished in conjunction with the closing of the sale of your relinquished residential or commercial property within the prescribed 1031 Exchange deadlines.
No matter which combined strategy you select, the Build-To-Suit 1031 Exchange permits you to get your replacement residential or commercial property and utilize a few of your 1031 Exchange funds to enhance your obtained replacement residential or commercial property on a tax-deferred basis provided the appropriate parking structure has actually been taken into location.
Parking Arrangement Pursuant to Revenue Procedure 2000-37
The replacement residential or commercial property can not be acquired and held straight by you while the enhancements or renovations to the residential or commercial property are being completed. Legal title to your replacement residential or commercial property must be obtained and held or "parked" by an Exchange Accommodation Titleholder (Exeter Reverse 1031 Exchange Services, LLC) in order to correctly structure a Build-To-Suit 1031 Exchange deal and receive tax-deferred exchange treatment.
This "parking plan" is laid out and allowed pursuant to Revenue Procedure 2000-37. The Internal Revenue Service released Rev. Proc. 2000-37 on September 15, 2000, which offers assistance on how to a Build-To-Suit 1031 Exchange deal by utilizing a parking arrangement in conjunction with either a Forward 1031 Exchange or a Reverse 1031 Exchange.
The Parking Arrangement
You will participate in an agreement called the Qualified Exchange Accommodation Agreement or "QEAA" that will define and structure the parking arrangement to be utilized for your Build-To-Suit Exchange deal. The QEAA is participated in by and in between you and Exeter Reverse 1031 Exchange Services, LLC as your Exchange Accommodation Titleholder or "EAT".
The Exchange Accommodation Titleholder or "EAT" is (and always need to be) a different legal entity apart from the Qualified Intermediary. The EAT will acquire and hold or "park" legal title to your replacement residential or commercial property throughout your Build-To-Suit 1031 Exchange transaction through an unique function entity often described as an "SPE."
Special Purpose Entity
Exeter Reverse 1031 Exchange Services, LLC, which serves as your Exchange Accommodation Titleholder or "EAT", will set-up a special function entity or "SPE" in the kind of a single member limited liability business or SMLLC that will be used specifically to get and hold or "park" title to your replacement residential or commercial property during your Build-To-Suit 1031 Exchange.
The formation of this special purpose entity is essential in order to protect you and your replacement residential or commercial property from liens, judgments and other legal problems originating from other clients' parked residential or commercial properties. The SPE guarantees that your parked residential or commercial property will never be kept in an entity that also holds legal title to other customers' parked residential or commercial properties.
Build-To-Suit 1031 Exchange Deadlines
Deadlines to complete your Build-To-Suit Exchange are the same as a Forward 1031 Exchange or a Reverse 1031 Exchange transaction, depending on which structure you have selected to integrate with your Build-To-Suit Exchange.
The 45 and 180 calendar day due dates are the same. You have 45 calendar days to recognize the appropriate residential or commercial property, once again depending upon which structure you have picked, and you have an additional 135 calendar days - for an overall of 180 calendar days - to complete your Build-To-Suit 1031 Exchange transaction.
Build-To-Suit Exchange Fees and Costs
Build-To-Suit 1031 Exchanges are more complicated and expensive structures, so you need to examine the quantity of depreciation regain and capital gain income tax liabilities being delayed to make sure that the expense of the Build-To-Suit 1031 Exchange transaction is justified.
Exeter 1031 Exchange Services, LLC would more than happy to supply you with a composed fee quote so that you understand exactly what your Build-To-Suit 1031 Exchange costs and expenses will be prior to starting with your transaction.
Beginning
This article has been a very fast, basic and concise introduction of Build-To-Suit 1031 Exchange transactions. You can click on this link to learn more on how you can get begun if you are prepared to continue with a Build-To-Suit Exchange or click on this link to get in touch with one of our 1031 Exchange Advisors for support.