Madison 1031 regularly handles all types of §1031 Exchanges regardless of the complexity of the transaction.
Under §1031 of the Internal Revenue Code, investors can avail themselves of various different approaches for doing a §1031 Exchange.
This, the most common type of §1031 Exchange, happens when an investor sells one real estate property — known as the Relinquished Property — and purchases another real estate property (or properties) — referred to as the Replacement Property(ies) — within 180 days following the sale/closing of the Relinquished Property. For purposes of real estate, any type of real estate is considered like-kind to any other type of real estate and thus qualifies for the Exchange. To get the safe harbor tax benefits of a Forward Exchange, the proceeds of the sale of the Relinquished Property must be held by a Qualified Intermediary from the time of the sale/closing of the Relinquished Property until the subsequent purchase/closing of the Replacement Property.
In a Reverse / Simultaneous Exchange, the Replacement Property is purchased by the investor before the sale/closing of the Relinquished Property. In that situation, the Replacement Property must be held by an Exchange Accommodation Titleholder (EAT) until the sale of the Relinquished Property, which must take place within 180 days following the purchase/closing of the Replacement Property. Although this is a more complex transaction, Madison 1031 handles Reverse Exchanges regularly.
A Construction or Improvement Exchange allows an investor to use a portion of the proceeds from the sale of the Relinquished Property to improve or build on a newly-purchased Replacement Property. This approach works well if the Replacement Property is less valuable than the property being relinquished. When a Construction Exchange is structured properly, the improvement costs can be used to equalize the Exchange. During the §1031 Exchange, the Qualified Intermediary (QI) holds title to the property while the construction improvements are being done. All improvements must be completed within 180 days of the sale of the Relinquished Property.
Offering the broadest menu of services, Madison 1031 regularly handles all types of §1031 Exchanges regardless of the complexity of the transaction. While Forward / Delayed Exchanges are the most common, straight-forward and easiest to do, not everyone has the know-how to do Reverse / Simultaneous Exchanges because of the complicated nature of the transaction.