types of exchanges» common misconceptions Types Of Exchanges Deferred Exchange Reverse Exchange Personal Property Exchange Construction Exchange  Deferred Exchanges Most Exchanges today are delayed or deferred exchanges.  The essence of a delayed Exchange is that the sale of the old property and the transfer of the new property to the Taxpayer take place at different times. In the typical delayed exchange, the taxpayer transfers the property to be sold to a "Qualified Intermediary" and the Qualified Intermediary sells the property to the buyer. In a separate and subsequent transaction, the Qualified Intermediary acquires the new property from the seller and conveys the new property to the taxpayer. However, specific provisions in IRC §1031 limit the amount of time that is allowed to lapse between the sale of the old property and the subsequent transfer of the new property to the Taxpayer. The Taxpayer has 45 days from the date of sale of the old property to identify the property he/she wants as the replacement property in the Exchange. The transfer of the replacement property to the taxpayer must occur: on or before 180 days from the date of sale of the old property OR before the time for filing the tax return for the tax year of the sale date of the old property, whichever occurs first. If the filing date of the taxpayer’s return occurs before the receipt of all replacement property, then the taxpayer must file a request for automatic extension so that the replacement property is acqired prior to the filing of the tax return. Reverse Exchanges Exchanges may also be done in reverse. In the typical reverse exchange, the taxpayer hires and funds an Exchange Accommodation Title Holder (EAT) to acquire the new property and hold the new property in escrow. Following the sale of the old property, the Qualified Intermediary acquires the new property from the EAT and conveys the new property to the taxpayer in conclusion of the exchange. Similar 45 day and 180 day time limits are imposed on the reverse exchange . Personal Property Personal property may be exchanged in a delayed exchange or reverse exchange for other like kind or like class personal property.  For Exchanges of tangible personal property,  the definition of Like Kind is much more restrictive.  Pursuant to IRC §1031 and the regulations, Like Kind personal property is defined as property which is of a like class. For example: A Computer and a Computer Printer are like class because they are in the same General Asset Class. A United Airlines 747-SP is like class to a TWA L-1011 because both airplanes are listed in the SIC Manual in Product Class 3721. A Road Grader may be exchanged for a Road Scraper without recognition of gain since both are in the same Product Class (SIC Code 3553). Construction Exchange In a construction exchange, the replacement property is acquired by an Exchange Accommodation Title Holder similar to the Reverse Exchange.  After the improvements are made, the property is deeded to the taxpayer.   The Construction Exchange will end on or before the 180th day or the date the new property is deeded to the taxpayer.  For purposes of the Exchange, the value of the new property will be the total  of the contract price, plus the costs of all improvements that have been made and paid for before the date of such deeding.  Any improvements made after that date will not be included in the Exchange. Call the1st Authority on IRC §1031 Exchanges to discuss your particular circumstances.  You will find that we are experts on transaction structuring and will assist you in determining the best solution for your situation.