Esquire Exchange

Internal Revenue Code §1031 allows Exchangors to defer federal, and in many cases, state capital gains taxes by exchanging qualified real or personal property (referred to as “Relinquished Property”) for qualified “like-kind" property (referred to as “Replacement Property”). Internal Revenue Code §1031 tax deferred exchanges can be accomplished via a myriad of formulated transactions, including simultaneous, forward, reverse, build-to-suit and personal property exchange transactions.
Click Here (PDF)

The most basic and straightforward exchange transaction, and certainly the one envisioned by the Internal Revenue Service in exacting the tax deferred provisions of Internal Revenue Code §1031, involves a simultaneous or concurrent exchange (referred to collectively herein as a “Simultaneous Exchange”). In a Simultaneous Exchange, the disposition of the Relinquished Property and the acquisition of the Replacement Property occur simultaneously. More specifically, a Simultaneous Exchange involves the concurrent transfer of the Relinquished Property and acquisition of the Replacement Property.
Click Here (PDF)

The most common Internal Revenue Code §1031 tax deferred exchange is referred to as “Forward,” “Delayed,” or “Starker Exchange” (referred to collectively herein as a “Forward Exchange"). A Forward Exchange is defined simply as an exchange pursuant to which the Exchangor has disposed of the Relinquished Property prior to acquiring the Replacement Property. More specifically, in a Forward Exchange, there is an interval of not more than 180 calendar days between the time the Relinquished Property is disposed of and the Replacement Property is acquired.

Click Here (PDF)

In addition to a Forward Exchange, an Exchangor in an Internal Revenue Code §1031 tax deferred exchange may desire or require what is commonly referred to as a “Reverse Exchange.” Although somewhat less common and more complex than a Forward Exchange, a Reverse Exchange offers a greater level of flexibility than a Forward Exchange. A Reverse Exchange involves in transaction in which the Exchangor acquires Replacement Property prior to the disposition of the Relinquished Property.
Click Here (PDF)

A Build-To-Suit Tax Deferred Exchange, also referred to as a Construction or Improvement Exchange (referred to collectively herein as a “Build-To-Suit Exchange"), gives the Exchangor the opportunity to utilize exchange proceeds to build, renovate, or improve Replacement Property and still satisfy the requirements for an Internal Revneu Code §1031 tax deferred exchange.
Click Here (PDF)

Similar to the benefits applicable to the like-kind exchange of real property, an Exchangor of personal property may enter into an Internal Revenue Code §1031 tax deferred exchange. Given the tax rules applicable to the sale or other transfer of personal property (e.g., depreciation recapture, increased tax rate, etc.), the tax advantages available to an Exchangor of personal property may be more beneficial than an Exchangor of real property.
Click Here (PDF)

Under certain circumstances, an Exchangor may desire to exchange multiple assets or, pursuant to the sale of an entire business, all of the assets of a business enterprise. Such an exchange raises questions as to the applicability of the “like-kind” exchange rules as well as whether these rules can be applied on the aggregate or whether the rules need to be applied on a property-by-property basis.

Click Here (PDF)

A Master Like-Kind Exchange Program (“Master LKE”) is generally beneficial under circumstances where an Exchangor engages in the continuous disposal of the same general class of asset which results in relatively little gain recognition. By utilizing a Master LKE program, an Exchangor of high-volume/low gain generating assets can apply the tax deferral provisions of Internal Revenue Code §1031 to the ongoing exchange of these assets.
Click Here (PDF)

In addition to exchanges of fee interest real property, an Exchangor may engage in the exchange of other interests in real property. For such purposes, the Internal Revenue Service will defer to state law in determining whether such other interests are to be treated as real property or as personal property.
Click Here (PDF)

To view Adobe Acrobat PDF files, you need to have Adobe Acrobat Reader installed on your computer. To obtain a free copy, please click here:

Esquire Exchange, LLC cannot provide legal or tax advice regarding the specific tax consequences of a transaction.

Investors considering an Internal Revenue Code §1031 tax deferred exchange should seek the counsel of their accountant and attorney to obtain professional and legal advice.