masaken-ae

This article will provide you with a very quick and succinct overview of Build-To-Suit 1031 Exchange transactions. Build-To-Suit 1031 Exchange structures are also described as Improvement 1031 Exchanges or Construction 1031 Exchanges. These 3 names all refer to the exact same 1031 Exchange method that allows you to use the proceeds from the sale of your relinquished residential or commercial property to purchase your replacement residential or commercial property but likewise spend for to improve your gotten replacement residential or commercial property.

Build-To-Suit 1031 Exchange deals are complex tax-deferred techniques. You should always look for the suggestions of your legal and tax counsel before participating in any Build-To-Suit Exchange deal. Exeter 1031 Exchange Services, LLC is always readily available to deal 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 deal where you can offer your given up residential or commercial property and utilize the proceeds from the sale of your relinquished residential or commercial property to obtain replacement residential or commercial property. It also allows you to use any excess sale proceeds to improve the gotten replacement residential or commercial property as part of your 1031 Exchange transaction.

The earnings from the sale of your given up residential or commercial property that are used toward the acquisition of your replacement residential or commercial property as well as those earnings that are paid or utilized for enhancements to your replacement residential or commercial property will certify for tax-deferred exchange treatment supplied the transaction is structured appropriately as a Build-To-Suit Exchange.

Build-To-Suit 1031 Exchanges are structured as either a Forward Exchange or a Reverse Exchange. These are substantially more complicated 1031 Exchange transactions and must just be administered by a Certified 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 benefit from the Build-To-Suit 1031 Exchange method. This combined 1031 Exchange technique allows you to offer your given up residential or commercial property first and then consequently 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 recognition of the replacement residential or commercial property and the enhancements to be made to the gotten replacement residential or commercial property, along with the actual closing on the replacement residential or commercial property, need to be carried out and completed within the prescribed 1031 Exchange deadlines.

Build-To-Suit Exchange With a Reverse 1031 Exchange

Reverse 1031 Exchange deals can also be structured to make the most of the Build-To-Suit 1031 Exchange technique. This combined Reverse and Build-To-Suit 1031 Exchange technique allows you to acquire your replacement residential or commercial property first and likewise enhance the gotten replacement residential or commercial property throughout the time that you're attempting to offer your existing relinquished residential or commercial property.

The improvements that are to be made to the gotten replacement residential or commercial property, in addition to the actual transfer of the replacement residential or commercial property with the completed enhancements to you from the Exchange Accommodation Titleholder (see comments listed below), need to be performed and finished in combination with the closing of the sale of your given up residential or commercial property within the prescribed 1031 Exchange due dates.

No matter which combined method you select, the Build-To-Suit 1031 Exchange permits you to obtain your replacement residential or commercial property and utilize some of your 1031 Exchange funds to enhance your obtained replacement residential or commercial property on a tax-deferred basis offered the correct parking structure has actually 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 restorations to the residential or commercial property are being finished. Legal title to your replacement residential or commercial property should be obtained 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 arrangement" is outlined and allowed pursuant to Revenue Procedure 2000-37. The Irs provided Rev. Proc. 2000-37 on September 15, 2000, which offers assistance on how to properly structure a Build-To-Suit 1031 Exchange deal by utilizing a parking arrangement in conjunction 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 plan to be utilized for your Build-To-Suit Exchange deal. The QEAA is gotten in 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 purchase and hold or "park" legal title to your replacement residential or commercial property throughout your Build-To-Suit 1031 Exchange deal through an unique function entity typically described as an "SPE."

Special Purpose Entity

Exeter Reverse 1031 Exchange Services, LLC, which serves as your Exchange Accommodation Titleholder or "EAT", will set-up a special function entity or "SPE" in the kind of a single member restricted liability business or SMLLC that will be used specifically to obtain and hold or "park" title to your replacement residential or commercial property throughout your Build-To-Suit 1031 Exchange.

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

Build-To-Suit 1031 Exchange Deadlines

Deadlines to complete your Build-To-Suit Exchange are the same as a Forward 1031 Exchange or a Reverse 1031 Exchange deal, depending upon which structure you have picked to combine with your Build-To-Suit Exchange.

The 45 and 180 calendar day deadlines are the exact same. You have 45 calendar days to determine the proper residential or commercial property, again depending upon which you have chosen, and you have an extra 135 calendar days - for a total of 180 calendar days - to finish your Build-To-Suit 1031 Exchange deal.

Build-To-Suit Exchange Fees and Costs

Build-To-Suit 1031 Exchanges are more complicated and costly structures, so you need to review the quantity of depreciation recapture and capital gain income tax liabilities being postponed to guarantee that the cost of the Build-To-Suit 1031 Exchange deal is warranted.

Exeter 1031 Exchange Services, LLC would enjoy to supply you with a written cost quote so that you understand exactly what your Build-To-Suit 1031 Exchange charges and costs will be prior to getting going with your deal.

Beginning

This article has been a really quick, fundamental and succinct summary of Build-To-Suit 1031 Exchange transactions. You can click on this link for more details on how you can get started if you are ready to continue with a Build-To-Suit Exchange or click here to contact one of our 1031 Exchange Advisors for help.