Overview of the Improvement 1031 Exchange
Build-To-Suit 1031 Exchanges or Construction 1031 Exchanges are complex tax-deferred strategies where the Investor utilizes their 1031 Exchange profits to make improvements upon their acquired replacement property; the funds used to do so can be classified as tax deferred exchange treatment if the transaction is structured as an Improvement Exchange by the Investor’s Qualified Intermediary, and are used with either a Forward Exchange or a Reverse Exchange.
Deadlines to complete an Improvement Exchange are the same as a Forward 1031 Exchange or a Reverse 1031 Exchange transaction: 45 calendar days to identify the appropriate property, and 180 calendar days to complete the Improvement 1031 Exchange transaction.
Combining an Improvement Exchange with a Forward 1031 Exchange allows the Investor to sell their relinquished property first and then identify, acquire, and make improvements to their replacement property. Meanwhile, combining an Improvement Exchange with a Reverse 1031 Exchange allows the Investor to acquire and improve their replacement property while attempting to sell their relinquished property. Said improvements must be finished before the closing of the sale of the relinquished property.
Utilizing an Improvement Exchange within the confines of either a Forward 1031 Exchange or a Reverse 1031 Exchange enables the Investor to use a portion of their 1031 Exchange funds to improve their acquired replacement property on a tax-deferred basis. The Investor’s Exchange Accommodation Titleholder (EAT) will hold (or park) the title to the Investor’s replacement property during their Improvement 1031 Exchange to protect their client from liens and legal issues by setting up a special purpose entity in the form of a single member LLC.
Disclaimer: 1031 exchange made simple does not guarantee the performance of the QI's in our referral network and we can not be held liable for any misrepresentations or mistakes in regards to a 1031 exchange by one of the QI's that we refer to you. 1031 Exchange made simple does not provide tax advice nor can we make representations regarding the tax consequences of an exchange transaction. 1031 Exchange made simple is a 1031 QI Referral Network. 1031 made simple is not responsible (in any way) for the performance, creditability, and financial condition of any QI in our network. In this new economic environment it is imperative that all potential 1031 exchange customers do their own due diligence and research on any QI that they may use, on a 1031 exchange. Please verify and check the validity of the Bonding and Insurance of your QI. It may be wise to have your 1031 exchange accounts set up as separate, individual customer accounts. Our web site is to be used as a information based web site only. All parties doing a 1031 exchange must consult their tax advisors or attorney for this information.
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