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 > Exchanging Investment Properties: When Should You Use a Built To Suit Exchange?

A built-to-suit exchange is a 1031 exchange that lets the investor use money from the sale of the relinquished property to make improvements to the acquired property. At first glace, built-to-suit exchanges seem to violate the rule that sellers cannot take constructive receipt of proceeds from relinquished investment properties. However, recognizing that exchange properties may be in vastly different condition, the IRS allows investors to use part of the proceeds from relinquished property to improve the property they receive in the exchange.

The Parking Arrangement

In Revenue Procedure 2000-37, the IRS states how a built-to-suit exchange must occur for the seller to avoid taking constructive receipt. The acquired property must be “parked” by an Exchange Accommodation Titleholder (EAT) through an agreement known as a Qualified Exchange Accommodation Agreement (QEAA). After the investor enters the agreement, the EAT parks the acquired property with a Special Purpose Entity (SPE) to ensure that the real estate is held independently of other parked properties, and thus avoids any troublesome legalities associated with other properties.

While the SPE holds the property, the investor must perform improvements during the 180-day period in which 1031 investment properties must be exchanged. If you are considering investing in a commercial investment property that needs significant work, it is important to consider whether desired improvements could be made within the timeframe in which the exchange must be completed. Built-to-suit exchanges are ideal for investment properties that need to minor to moderate improvements to generate optimal rent income and attract valuable tenants.

Consult a Broker

Built-to-suit exchanges are complex arrangements that are highly beneficial in certain situations. If you are open to acquiring investment property that needs improvements, a built-to-suit exchange is an excellent way to make the improvements while still realizing the deferred tax benefits of a 1031 exchange.

The brokers at Westwood Net Lease Advisors have helped numerous investors engage in successful built-to-suit-exchanges by handling each aspect of the process, from property identification to the close of the exchange.

To discuss your commercial property investment interests, please call Jeff Gitt, Co-Founder/Principal of Westwood Net Lease Advisors at 314-757-1031, jgitt@westwoodnetlease.com, or use our contact form at http://www.1031-nnn-properties.com/about-us/contact/.
June 3, 2013 | Unregistered CommenterChris Schellin