This short article will supply you with an extremely brief and succinct introduction of Build-To-Suit 1031 Exchange deals. Build-To-Suit 1031 Exchange structures are also referred to as Improvement 1031 Exchanges or Construction 1031 Exchanges. These 3 names all describe the same 1031 Exchange technique that allows you to utilize the proceeds from the sale of your given up residential or commercial property to buy your replacement residential or commercial property however also pay for to improve your acquired replacement residential or commercial property.

Build-To-Suit 1031 Exchange transactions are complicated tax-deferred methods. You ought to constantly seek 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 work with you and your advisors in planning your Build-To-Suit 1031 Exchange.

Build-To-Suit 1031 Exchanges

The Build-To-Suit Exchange enables 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 get replacement residential or commercial property. It also permits you to use any excess sale proceeds to enhance the acquired replacement residential or commercial property as part of your 1031 Exchange deal.

The proceeds from the sale of your relinquished residential or commercial property that are utilized toward the acquisition of your replacement residential or commercial property as well as those earnings that are paid or used for improvements to your replacement residential or commercial property will get approved for tax-deferred exchange treatment provided 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 significantly more complex 1031 Exchange deals and ought to just be administered by a Competent Intermediary, such as Exeter 1031 Exchange Services, LLC that has considerable experience and proficiency with Build-To-Suit Exchanges.

Build-To-Suit Exchange With a Forward 1031 Exchange

Forward 1031 Exchange deals can be structured to make the most of the Build-To-Suit 1031 Exchange method. This combined 1031 Exchange method enables you to sell your given up residential or commercial property first and after that subsequently determine and get 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 improvements to be made to the acquired replacement residential or commercial property, along with the real closing on the replacement residential or commercial property, must be performed and completed within the recommended 1031 Exchange deadlines.

Build-To-Suit Exchange With a Reverse 1031 Exchange

Reverse 1031 Exchange deals can likewise be structured to take advantage of the Build-To-Suit 1031 Exchange method. This combined Reverse and Build-To-Suit 1031 Exchange technique permits you to get your replacement residential or commercial property initially and also improve the obtained replacement residential or commercial property during the time that you're attempting to sell your existing given up residential or commercial property.

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

No matter which integrated strategy you choose, the Build-To-Suit 1031 Exchange permits you to obtain your replacement residential or commercial property and use some of your 1031 Exchange funds to improve your gotten replacement residential or commercial property on a tax-deferred basis provided the correct parking structure has been taken into location.

Parking Arrangement Pursuant to Revenue Procedure 2000-37

The replacement residential or commercial property can not be gotten and held straight by you while the enhancements or restorations to the residential or commercial property are being completed. Legal title to your replacement residential or commercial property need to be acquired 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 permitted pursuant to Revenue Procedure 2000-37. The Irs released Rev. Proc. 2000-37 on September 15, 2000, which offers assistance on how to effectively structure a Build-To-Suit 1031 Exchange deal by utilizing a parking plan in combination with either a Forward 1031 Exchange or a Reverse 1031 Exchange.

The Parking Arrangement

You will enter into a contract called the Qualified Exchange Accommodation Agreement or "QEAA" that will specify and structure the parking arrangement to be used for your Build-To-Suit Exchange deal. The QEAA is entered into 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 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 during your Build-To-Suit 1031 Exchange transaction through an unique function entity frequently 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 a special purpose entity or "SPE" in the type of a single member restricted liability business or SMLLC that will be utilized exclusively to acquire and hold or "park" title to your replacement residential or commercial property throughout your Build-To-Suit 1031 Exchange.

The development of this unique purpose entity is crucial in order to protect you and your replacement residential or commercial property from liens, judgments and other legal issues originating from other customers' parked residential or commercial properties. The SPE makes sure that your parked residential or commercial property will never ever be held in an entity that also holds legal title to other clients' parked residential or commercial properties.

Build-To-Suit 1031 Exchange Deadlines

Deadlines to complete your Build-To-Suit Exchange are the very same as a Forward 1031 Exchange or a Reverse 1031 Exchange deal, depending on which structure you have selected to integrate with your Build-To-Suit Exchange.

The 45 and 180 calendar day deadlines are the same. You have 45 calendar days to identify the appropriate residential or commercial property, again depending upon which structure you have chosen, 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 complex and pricey structures, so you need to examine the quantity of devaluation recapture and capital gain earnings tax liabilities being delayed to guarantee that the expense of the Build-To-Suit 1031 Exchange deal is justified.

Exeter 1031 Exchange Services, LLC would more than happy to supply you with a composed cost quote so that you understand precisely what your Build-To-Suit 1031 Exchange fees and expenses will be prior to getting going with your transaction.

Starting

This article has been an extremely fast, fundamental and concise introduction of Build-To-Suit 1031 Exchange transactions. You can click here to learn more on how you can begin if you are prepared to proceed with a Build-To-Suit Exchange or click here to call one of our 1031 Exchange Advisors for help.