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A Quick Reference Guide to1031 ExchangesMaking the most of your 1031 Exchange transaction.
Exeter 1031 ExchangeServices, LLC404 Camino del Rio South, Ste 600San Diego, CA 92108(619) email@example.comThis Quick Reference Guide to 1031 Exchanges is courtesy of:© Copyright 2006 – 2019 by Exeter 1031 Exchange Services, LLC. All Rights Reserved.
Table of Contents1031 Exchange Benets ................................................ 41031 Echange Structures .............................................. 51031 Exchange Qualications ...................................... 61031 Exchange Reinvestment Requirement ............... 71031 Exchange Deadlines ............................................ 81031 Exchange Identication Rules ............................. 8Choosing a Reliable Qualied Intermediary ............... 93
1031 Exchange BenetsThe sale of real estate can result in Federal and state taxes as high as 40% of your taxable gain. It’s much more difcult to reinvest in replacement property when you must pay this much in taxes. That’s why 1031 Exchanges are such a popular tax deferral strategy. A 1031 Exchange allows you to indenitely defer the payment of your Federal and state capital gain and depre-ciation recapture taxes, and avoid the Medicare Surcharge (Obamacare tax), when you sell real estate and then reinvest in replacement property. You keep all your money invested and working for you instead of paying taxes. You should always consult with your legal, tax and nancial advisors to ensure the 1031 Exchange strategy is right for you. 4
1031 Exchange Structures Once you have met with your advisors, you need to decide which 1031 Exchange structure is most appropriate for you. Here is a quick summary of the various 1031 Exchange structures available. Simultaneous or Concurrent 1031 Exchange Your relin-quished property and replacement property transactions both close at the exact same time. Forward or Delayed 1031 Exchange The sale of your re-linquished property closes rst, and then the acquisition of your replacement property closes later within the prescribed deadlines.Reverse 1031 Exchange The purchase of your replace-ment property closes rst and is acquired and held or “parked” by your Qualied Intermediary. The sale of your relinquished property closes later within the prescribed deadlines.Build-to-Suit (Improvement or Construction) 1031 Exchange Your 1031 Exchange proceeds from the sale of your relin-quished property are used to acquire your replacement property, then improve the replacement property through the 1031 Exchange process.5
Foreign Property Exchange Foreign property can be sold and exchanged for other foreign property.1031 Exchange QualicationsYou and your advisors need to ensure that your 1031 Exchange is properly structured and in compliance with the applicable tax codes, regulations and rulings. The following summarizes the requirements for a successful 1031 Ex-change. Qualied Intermediary You must retain the services of a Qualied Intermediary to administer your 1031 Exchange before you close on the sale or purchase of any property. Qualied Use Property You must have the intent to hold your relinquished property and your replacement property for rental, investment or business use to qualify for 1031 Exchange treatment. Properties held for personal use or for sale (rehabs/ips) do not qualify for a 1031 Exchange.6
Like-Kind Property The relinquished property and the replacement property in your 1031 Exchange must be “like-kind property”. This simply means you are selling real estate and must buy real estate. ANY kind of real estate is like-kind to ANY other kind of real estate if both properties are held for rental, investment or business use. Like-kind does NOT mean condo for condo or apartment for apart-ment.1031 Exchange Reinvestment Requirement Trade Equal or Up in Value You must trade equal or up in value to defer all your taxes. The total purchase price of your replacement properties must equal or exceed the net sale price of your relinquished properties. You can trade down in value, but you will pay some taxes. Reinvest 100% of Net Proceeds All your equity from the sale of your relinquished property must be reinvested in one or more replacement properties. You can pull cash out, but it will be taxable.Replace Debt The new loan amount on your replacement property will be the difference between the total purchase price less the net proceeds reinvested unless you put cash 7
into the transaction. Debt can be replaced with new cash. 1031 Exchange Deadlines You have exactly 45 calendar days after closing on your rst relinquished property to identify your replacement prop-erties, and exactly 180 calendar days after closing on your rst relinquished property to complete your 1031 Exchange. The 180 calendar days includes the 45 days to identify your replacement properties. 1031 Exchange Identication RulesYou must comply with one of the following identication rules: Three Property Rule You can identify up to three (3) replace-ment properties. The limit is on the number of properties 8
identied and not the value of properties identied. 200% Rule You can identify as many replacement proper-ties as you like as long as the total value of the identied properties does not exceed 200% of the gross sale price of the relinquished property. The limit is on the value of the properties identied and not the number of properties identied. 95% Exception You may identify as many replacement properties as you want, but you must acquire and close on 95% of the value identied.Choosing a Reliable Qualied Intermediary The Qualied Intermediary plays a critical role in your 1031 Exchange, especially when it comes to holding and safeguarding your 1031 Exchange funds. The safety of your funds should be the most important part of your due dili-gence. It is crucial that you thoroughly evaluate prospective Qualied Intermediaries. We recommend that you consider the following criteria prior to selecting your Qualied Inter-mediary: Licensed, Regulated and Audited Qualied Intermediaries should be licensed, regulated, and audited by a regulatory 9
body, such as the division of banking, to ensure they are operating in a safe, sound and secure manner. Exeter Trust Company is licensed, regulated, and audited by the Wyo-ming Division of Banking.Qualied Trust Accounts Your 1031 Exchange funds should always be held in separate, segregated Qualied Trust Accounts so funds are clearly marked as client trust funds and not corporate funds. Exeter 1031 will deposit, hold and safeguard your funds in separate, segregated, dual-signa-ture Qualied Trust Accounts at Exeter Trust Company. Bonding, Insurance and Equity Capital Qualied Interme-diaries should have signicant delity bond coverage, errors and omissions insurance and equity capital to protect your 1031 Exchange funds. The Exeter Group of Companies maintains signicant delity bond coverage, errors and 10
omissions insurance and equity capital to protect clients’ 1031 Exchange funds, as required by the Wyoming Division of Banking. Technical Expertise and Experience Qualied Interme-diaries should provide advisory and consultative services and not just be a “processor.” You and your advisors need a Qualied Intermediary that has decades of experience and expertise in the administration and structuring of 1031 Exchange transactions. Exeter 1031 Exchange Services, LLC has decades of experience and will work with you and your advisors to help answer questions and discuss poten-tial strategies. Independent; No Conicts-of-Interest Choose an indepen-dent, institutional Qualied Intermediary with no conicts of interest. Exeter 1031 Exchange Services, LLC is not associated with any title insurance company, escrow com-pany, settlement services company, or investment products company and is only focused on your 1031 Exchange and nothing more. Please feel free to call Exeter 1031 Exchange Services, LLC with any questions you might have. We are always available to assist you 24/7. 11
A Better 1031 Exchange ExperienceWork with a company that is licensed, regulatedand audited by the Wyoming Division of Banking, and can collaborate with investors’ legal and tax advisors. A rm with high levels of delitybonding, E&O insurance and equity capital. We deliver a better 1031 Exchange experience.Qualied Trust Accounts administered by Exeter Trust Company.12
13The Exeter Group of CompaniesExeter 1031 Exchange Services, LLC1031 Exchange Services Group Qualied Intermediary for 1031 Exchanges Exeter1031.comExeter Asset Services Corporation1031 Exchange Services Group Exchange Accommodation Titleholder for Parking ArrangementsExeterAssetServices.comExeter Trust Company, Cheyenne, Wyoming1031 Exchange Services Group Trustee for Qualied Trust Accounts Retirement Services GroupCustodian for Self-Directed IRAsCustody Services GroupCustodian for Non-Retirement Account AssetsEscrow Agent for Specialized Holding EscrowsTrust Services GroupTrustee for Title Holding Trusts (Land Trusts)ExeterTrustCompany.net