The ability to exchange real estate is the most powerful tool available to increase the wealth of investment real estate owners. This is an advantage not available to owners of equities and fixed-income securities.

Since 1986, however, the rules for the exchange of one real property for another have become progressively more complex . Prior to 1975, all real property exchanges were simultaneous exchanges in which title passed between two (or three) parties on the same day. But in that year, the courts in the Starker decisions decided that exchanges need not be simultaneous. Over the next 11 years, the IRS published rules and regulations which outlined the requirements for a delayed exchange – one in which title need not pass on the same day. In today’s market, it is estimated that from 50-65% of all income-producing properties change hands using S.1031 exchanges.

Although simultaneous exchanges are still transacted, the vast majority of exchanges are now delayed exchanges. This structure involves the use of a third party, a Qualified Intermediary, which acts as a strawman to receive the cash proceeds from the sale of the investor’s relinquished property and uses that cash to acquire a replacement property specified by the investor.The IRS has established 4 “safe harbors” which, when followed, preclude a determination that the investor is in actual or constructive receipt of his funds. The actual or constructive receipt of cash may entirely invalidate an exchange or cause a portion of the cash received from the disposition of the relinquished property to become immediately taxable.

Over 30 years, our company has completed many millions of dollars of exchanges involving both improved property of all types, and vacant land. We have never had an incomplete or disqualified exchange.

Although most investors who exchange are motivated to save tax dollars, the most important consideration in exchanging is the acquisition of a quality replacement property which fits the future investment objectives of the exchangor.

If you are thinking of exchanging your currently owned investment for one or more replacements, or if you have a number of properties which you would like to exchange for just one property, we can help you from start to finish.

To receive a copy of Frequently Asked Questions About Exchanging, simply send me an e-mail: Click HERE