Simultaneous Exchange
The simultaneous exchange takes place when ownership of both the relinquished property and replacement property is swapped. Deed transfers, however, when carried out concurrently can often be difficult and hence this type of exchange is less common than the
delayed exchange.
The Delayed Exchange
The delayed exchange, most common nationwide, occurs when a property is sold and within 180 days, a replacement property is purchased. Replacement properties must be identified within the first 45 days after the sale of the relinquished property and are part of the 180 day period. The proceeds from the sale of the relinquished property must be held by a Qualified Intermediary until the purchase of the replacement property.
The Reverse Exchange
In a reverse exchange, the replacement property is identified and purchased before the relinquished property is sold. Title of the replacement property must be held by the Qualified Intermediary until the sale of the relinquished property, which must take place within 180 days. The exchange is then completed when the deed of the replacement property is transferred back to the exchanger. Due to its complexity and potential legal hazards, reverse exchanges can incur high fees. However, AFC offers competitive rates and draws upon substantial knowledge to lead our customers past these difficulties and hazards with ease.
The Improvement Exchange
The Improvement Exchange, also referred to as the Construction Exchange or Build-to-Suit Exchange, are conducted when the exchanger wishes to either make improvements to a identified replacement property or, construct a new replacement property. This exchange may be particularly appealing to investors, as it provides the opportunity to acquire property needing renovation or purchase vacant land and construct the property according to desired specifications. The subject property is held by the Qualified Intermediary until the end of the 180 day period after the sale of the relinquished property. The Qualified Intermediary, in turn, makes payments to contractors and suppliers who are contracted for renovation of the property. The procedure is completed when the exchanger is given back the title of the replacement property. This exchange type, like the reverse exchange, can encounter complexity within the process and as a result, incurs high fees. AFC, however, makes sure that any delays or challenges the process brings can be easily averted through advance planning and preparation.
The Personal Property/Business Asset Exchange
Internal Revenue Code also permits the exchange of property other than real estate to defer capital gains taxes. For example, livestock, high-priced artwork, and business assets would qualify as personal or business property available for exchange. However, exchanging personal property can be at times more complex than exchanging real property, as the property exchanged must fit under the same product or general asset classes. There are also items which cannot be exchanged according to IRC, such as Goodwill of a business. It is advised to consult a financial or tax advisor before initiating any personal property exchanges.
GENERAL ASSET CLASSES
1. Office furniture, fixtures, and equipment;
2. Information systems (computers);
3. Data handling equipment, except computers;
4. Airplanes and helicopters;
5. Automobiles and taxis;
6. Buses;
7. Light general-purpose trucks;
8. Heavy general-purpose trucks;
9. Railroad cars and locomotives;
10. Tractor units for use over-the-road;
11. Trailers and trailer-mounted containers;
12. Vessels, barges, tugs, and similar water transportation equipment;
13. Industrial steam and electric generation and distribution systems.
Personal Property Not Eligible for Exchange
Ø Stock in trade or other property held primarily for sale
Ø Stocks, bonds or notes
Ø Other securities or evidence of indebtedness or interest
Ø Interest in a partnership
Ø Certificates of trust or beneficial interests.
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