This article will supply you with a very short and succinct summary 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 refer to the very same 1031 Exchange technique that permits you to use the profits from the sale of your relinquished residential or commercial property to buy your replacement residential or commercial property but likewise spend for to enhance your obtained replacement residential or commercial property.

Build-To-Suit 1031 Exchange deals are intricate tax-deferred strategies. You need to constantly look for the advice of your legal and tax counsel before entering into any Build-To-Suit Exchange deal. Exeter 1031 Exchange Services, LLC is always readily available to deal with you and your advisors in preparing your Build-To-Suit 1031 Exchange.

Build-To-Suit 1031 Exchanges

The Build-To-Suit Exchange allows you to structure a 1031 Exchange transaction where you can offer your given up residential or commercial property and use the profits from the sale of your relinquished residential or commercial property to acquire replacement residential or commercial property. It also allows you to use any excess sale continues to enhance the obtained replacement residential or commercial property as part of your 1031 Exchange transaction.

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 along with those proceeds that are paid or utilized for enhancements to your replacement residential or commercial property will qualify for tax-deferred exchange treatment supplied the transaction is structured correctly as a Build-To-Suit Exchange.

Build-To-Suit 1031 Exchanges are structured as either a Forward Exchange or a Reverse Exchange. These are considerably more complicated 1031 Exchange deals and must just be administered by a Competent Intermediary, such as Exeter 1031 Exchange Services, LLC that has considerable experience and knowledge with Build-To-Suit Exchanges.

Build-To-Suit Exchange With a Forward 1031 Exchange

Forward 1031 Exchange transactions can be structured to benefit from the Build-To-Suit 1031 Exchange method. This combined 1031 Exchange method allows you to sell your relinquished residential or commercial property first and after that subsequently determine and obtain replacement residential or commercial property in addition to make enhancements 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 enhancements to be made to the acquired replacement residential or commercial property, as well as the real closing on the replacement residential or commercial property, must be performed and finished within the recommended 1031 Exchange due dates.

Build-To-Suit Exchange With a Reverse 1031 Exchange

Reverse 1031 Exchange transactions can also be structured to make the most of the Build-To-Suit 1031 Exchange method. This combined Reverse and Build-To-Suit 1031 Exchange technique permits you to acquire your replacement residential or commercial property first and also improve the gotten replacement residential or commercial property throughout the time that you're trying to offer your existing given up residential or commercial property.

The improvements that are to be made to the gotten replacement residential or commercial property, along with the real transfer of the replacement residential or commercial property with the completed improvements to you from the Exchange Accommodation Titleholder (see remarks below), should be performed and finished in combination with the closing of the sale of your relinquished residential or commercial property within the prescribed 1031 Exchange deadlines.

No matter which combined method 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 gotten replacement residential or commercial property on a tax-deferred basis offered the correct parking structure has been put into location.

Parking Arrangement Pursuant to Revenue Procedure 2000-37

The replacement residential or commercial property can not be obtained and held directly by you while the enhancements or remodellings to the residential or commercial property are being completed. Legal title to your replacement residential or commercial property must be gotten and held or "parked" by an Exchange Accommodation Titleholder (Exeter Reverse 1031 Exchange Services, LLC) in order to properly structure a Build-To-Suit 1031 Exchange deal and qualify for tax-deferred exchange treatment.

This "parking plan" is detailed and permitted pursuant to Revenue Procedure 2000-37. The Internal Revenue Service issued Rev. Proc. 2000-37 on September 15, 2000, which supplies assistance on how to properly structure a Build-To-Suit 1031 Exchange deal by using a parking arrangement in combination 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 plan to be used for your Build-To-Suit Exchange deal. The QEAA is participated in by and 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 ought to be) a separate legal entity apart from the Qualified Intermediary. The EAT will buy 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 referred to as an "SPE."

Special Purpose Entity

Exeter Reverse 1031 Exchange Services, LLC, which acts as your Exchange Accommodation Titleholder or "EAT", will set-up an unique purpose entity or "SPE" in the form of a single member restricted liability business or SMLLC that will be used solely to obtain and hold or "park" title to your replacement residential or commercial property during your Build-To-Suit 1031 Exchange.

The development of this special function entity is vital in order to protect you and your replacement residential or commercial property from liens, judgments and other legal issues stemming from other clients' parked residential or commercial properties. The SPE ensures that your parked residential or commercial property will never ever be kept in an entity that likewise holds legal title to other customers' parked residential or commercial properties.

Build-To-Suit 1031 Exchange Deadlines

Deadlines to finish your Build-To-Suit Exchange are the very 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 exact same. You have 45 calendar days to recognize the appropriate residential or commercial property, once again depending on which structure you have actually picked, and you have an additional 135 calendar days - for a total 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 pricey structures, so you require to examine the amount of depreciation recapture and capital gain earnings tax liabilities being deferred to ensure that the expense of the Build-To-Suit 1031 Exchange transaction is warranted.

Exeter 1031 Exchange Services, LLC would be happy to provide you with a written cost quote so that you know precisely what your Build-To-Suit 1031 Exchange charges and expenses will be prior to starting with your deal.

Getting Started

This article has actually been a really quick, basic and concise summary of Build-To-Suit 1031 Exchange deals. You can click here to learn more on how you can start if you are ready to continue with a Build-To-Suit Exchange or click here to contact one of our 1031 Exchange Advisors for assistance.