A properly structured exchange allows you to sell property, reinvest the proceeds in new property and defer all capital gain taxes. 1031 (a) (1) states: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged soley for property of like-kind which is to be held either for productive use in a trade or business or for investment."

Capital gain deferment requires exchange of "like-kind" relinquished property for other "like-kind" replacement property. Real property held for investment or used in a trade or business can be exchanged for other real property held for investment or used in a trade or business.

Delayed Exchange - this is the most common exchange format, providing investors up to a maximum of 180 days to purchase replacement property. The use of a Qualified Intermediary is required to complete a valid delayed exchange. Simultaneous exchange - most investors today use an intermediary to safely facilitate a simultaneous exchange. Improvement Exchange - This exchange allows you to use exchange proceeds to make improvements to existing property or build new replacement property. Reverse Exchange - This is the purchase of replacement property prior to closing on relinquished property. Personal Property Exchange - Personal property, i.e. aircraft or business equipment can qualify for tax deferral.

Prior to closing the sale of the relinquished property, the Exchanger enters into the Exchange Agreement with an intermediary. Pursuant to the agreement, an assignment is executed prior to closing and the intermediary assumes the Exchanger's purchase and sale agreement. The intermediary instructs the closing/escrow office to directly deed the property from Exchanger to buyer. Proceeds are transferred directly to the intermediary, protecting the Exchanger from actual or constructive recipt of funds. 1031 regulations mandate restrictions on the Exchanger's ability to access exchange proceeds at any time. Please consult with an intermediary for more details on these restrictions.

Exchanger must properly identify potential replacement properties within 45 calendar days. The intermediary provides the Exchanger with specific identification requirements.

Exchanger has 180 calendar days from closing the relinquished property, or tax filing date, whichever is earlier, to acquire "like-kind" replacement properties. Prior to closing on the replacement property, the Exchanger assigns the purchase and sale agreement to the intermediary. After assignment is executed, exchange is complete when intermediary purchases the replacement property with exchange proceeds and transfers it back to the Exchanger by a direct deed from seller.