The 1031 Exchange Institute

Welcome to The 1031 Exchange Institute™. The 1031 Exchange Institute is your complete online resource for 1031 exchange, 1033 exchange, 1034 exchange, 721 exchange, 453 installment sale and 121 exclusion information.  Information will also be provided regarding Self-Directed IRAs, including Traditional IRAs, ROTH IRAs, SEP-IRAs and SIMPLE IRAs. 

The 1031 Exchange Institute is dedicated to educating and informing real estate investors and their advisors on the benefits of 1031 tax-deferred exchanges and other tax deferred and tax exlcusion strategies so they can make better informed investment decisions.

1031 Exchange Discussion Forum > Understanding 1031 Exchange Types

1031 Exchanges are often used to augment investment portfolios that include commercial real estate. Because they allow investors to defer capital gains taxes, they can be used to "swap" properties in a portfolio without paying any financial penalties. Avoiding these financial penalties is essential for growing and maintaining a healthy portfolio.

The term "exchange" comes from the clause in the tax code that lets investors trade (exchange) one piece of property for another. Although the name suggests that an immediate transaction must be performed, but that isn't always the case. There are many types of 1031 exchanges that qualify.

Simultaneous Exchange is the most direct, but not the most common. In this scenario, one property is sold and another is purchased at the same time. This is the 1031 exchange in its most basic form, but chances are slim that an investor can arrange the closings of two properties on the same day, including the wiring of funds through a Qualified Intermediary. Because of this uncommon and difficult scenario, other types of 1031 exchanges that allow investors more flexibility and freedom are more common.

Delayed Exchanges and Reverse Exchanges are two sides of the same coin. Both involve a gap of time between the sale of the owned property and the purchase of the new property. In Delayed Exchanges, the investor has 45 days from the sale of the owned property to identify an exchange candidate property and 180 days to close the second sale. In a Reverse Exchange, the new property is purchased first. Often called "parking arrangements" this allows and investor to acquire an ideal new property before he relinquishes the owned property.

Build-to-Suit Exchanges (often referred to as Improvement Exchanges or Construction Exchanges), can help an investor manage the strict financial regulations of 1031 Exchanges. The profits from the sale of the original property must be used on the new property, but what happens if some of the profit remains after the second purchase? He could choose to pay capital gains tax on the remaining funds. However, he can continue to defer capital gains tax by using the excess funds to improve the new property as well as purchase it. In that way, 100% of the original investment is reinvested in the new property and 100% of the capital gains taxes are deferred.

1031 Exchanges can be complicated and may fail if not executed properly. To ensure your transactions are properly managed, consider using a brokerage firm. For a free consultation and assessment of your investment opportunities, please call Chris Schellin, president of Westwood Net Lease Advisors at 314-563-2208,, or visit to use our contact form.
March 10, 2013 | Unregistered CommenterChris Schellin