Quick Reference Guide

A Quick Reference Guide to

1031 Exchanges

Making the most of your 1031 Exchange transaction.

Hiba I. Exeter

Business Development Officer

Exeter 1031 Exchange Services, LLC

404 Camino del Rio South, Ste 600

San Diego, CA 92108

(619) 786-2062

hiba@exeterco.com

exeterco.com

This Quick Reference Guide to

1031 Exchanges is courtesy of:

Table of Contents

1031 Exchange Benets ................................................ 4

1031 Echange Structures .............................................. 5

1031 Exchange Qualications ...................................... 6

1031 Exchange Reinvestment Requirement ............... 7

1031 Exchange Deadlines ............................................ 8

1031 Exchange Identication Rules ............................. 8

Choosing a Reliable Qualied Intermediary ............... 9

1031 Exchange Benets

The sale of real estate can result in Federal and state taxes

as high as 40% of your taxable gain. It’s much more difcult

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 indenitely 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.

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 Qualied 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.

Foreign Property Exchange Foreign property can be sold

and exchanged for other foreign property.

1031 Exchange Qualications

You 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.

Qualied Intermediary You must retain the services of a

Qualied Intermediary to administer your 1031 Exchange

before you close on the sale or purchase of any property.

Qualied 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.

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

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 Identication Rules

You must comply with one of the following identication

rules:

Three Property Rule You can identify up to three (3) replace-

ment properties. The limit is on the number of properties

identied and not the value of properties identied.

200% Rule You can identify as many replacement proper-

ties as you like as long as the total value of the identied

properties does not exceed 200% of the gross sale price

of the relinquished property. The limit is on the value of

the properties identied and not the number of properties

identied.

95% Exception You may identify as many replacement

properties as you want, but you must acquire and close on

95% of the value identied.

Choosing a Reliable Qualied Intermediary

The Qualied 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

Qualied Intermediaries. We recommend that you consider

the following criteria prior to selecting your Qualied Inter-

mediary:

Licensed, Regulated and Audited Qualied Intermediaries

should be licensed, regulated, and audited by a regulatory

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.

Qualied Trust Accounts Your 1031 Exchange funds should

always be held in separate, segregated Qualied 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 Qualied Trust Accounts at Exeter Trust Company.

Bonding, Insurance and Equity Capital Qualied Interme-

diaries should have signicant delity bond coverage, errors

and omissions insurance and equity capital to protect your

1031 Exchange funds. The Exeter Group of Companies

maintains signicant delity bond coverage, errors and

omissions insurance and equity capital to protect clients’

1031 Exchange funds, as required by the Wyoming Division

of Banking.

Technical Expertise and Experience Qualied Interme-

diaries should provide advisory and consultative services

and not just be a “processor.” You and your advisors need

a Qualied 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 Conicts-of-Interest Choose an indepen-

dent, institutional Qualied Intermediary with no conicts

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.

A Better 1031 Exchange Experience

Work with a company that is licensed, regulated

and audited by the Wyoming Division of Banking,

and can collaborate with investors’ legal and

tax advisors. A rm with high levels of delity

bonding, E&O insurance and equity capital.

We deliver a better 1031 Exchange experience.

Qualied Trust Accounts administered by Exeter Trust Company.

The Exeter Group of Companies

Exeter 1031 Exchange Services, LLC

1031 Exchange Services Group

Qualied Intermediary for 1031 Exchanges

Exeter1031.com

Exeter Asset Services Corporation

1031 Exchange Services Group

Exchange Accommodation Titleholder for Parking Arrangements

ExeterAssetServices.com

Exeter Trust Company, Cheyenne, Wyoming

1031 Exchange Services Group

Trustee for Qualied Trust Accounts

Retirement Services Group

Custodian for Self-Directed IRAs

Custody Services Group

Custodian for Non-Retirement Account Assets

Escrow Agent for Specialized Holding Escrows

Trust Services Group

Trustee for Title Holding Trusts (Land Trusts)

ExeterTrustCompany.net