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CLIENTS
1031
Services, Inc
is a
full service 1031 exchange company. We can act as either your
qualified intermediary (QI) in a deferred exchange or your
exchange accommodation titleholder (EAT) in a reverse or
improvement exchange.
We work with your tax
counsel and you in structuring the transactions.
However, we do not act as tax counsel in your exchange
or review your tax returns. You must rely on your
tax counsel to analyze the specific tax consequences in
your exchange and to compute your realized and
recognized gain.
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Forward Exchanges
This
is the
most common type of exchange. A forward exchange
occurs when the relinquished
property sells prior to the acquisition of the replacement
property. A forward exchange is subject to strict time
limits, which are set forth in statutory language of
IRC
§ 1031.
Our Exchange
Procedure for a Deferred (Forward) Exchange
We prepare the exchange documentation and
forward it to your closing or escrow agent, along with
wire transfer instructions for the exchange funds. The
exchange funds are then invested in a money market
account with one of our relationship banks, or another bank
of your choosing. Most importantly, your exchange funds
are held in a qualified escrow account and are not
commingled with any other client or business funds for
investment purposes. For more information, see
"Why are Your
Exchange Funds Secure With Us?".
Your tax identification number is on the account and you
receive monthly statements directly from the bank
showing the principal balance and accrued interest so
you can independently verify the amount of your funds. After the closing on the
relinquished property, you have 45 days to identify the
replacement property. We will send you a letter
specifying your 45th day, and containing information on
how to identify the replacement property. You have 180 days from
the closing of the relinquished property, or the due
date of your tax return for the year of the transfer of
the relinquished property, including extensions, to
actually acquire all your replacement property. We prepare
the exchange documentation and send it to the closing agent
for the replacement property. The exchange funds
are then wired from your exchange account with the bank to
the
closing agent.
Reverse
Exchanges
If
the replacement property must be acquired prior to
transferring the relinquished property, the exchange can be structured as a "reverse" exchange under IRS
Revenue Procedure 2000-37. These transactions are
sometimes referred to as “parking arrangements” because
legal title to either the relinquished property or the
replacement property is "parked" with an "exchange
accommodation titleholder" or EAT. You have a maximum of
180 days to sell the relinquished property to a third
party buyer to complete the exchange once the reverse exchange
commences with the acquisition of the replacement
property. Title to each property is held in a
separate limited liability company to insulate that property
from the liabilities of any other client’s
property. We pledge the membership interest of the
limited liability company to you, or grant you a
mortgage, to secure your interest in the property.
Since 2005, we have acted as EAT for over $3 billion
worth of properties.
> Reverse Structures
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Improvement Exchanges
 Improvements
can also be made to your
replacement property as part of the exchange. For
example, a building can be constructed on land during
the 180 day exchange period. We form a
separate limited liability company to take title to the
replacement property and then use the exchange funds or
other financing to make the improvements. You
manage the construction. We pledge the membership
interest of the titleholder limited liability company to you, or
grant you a mortgage, to secure your interest in the
property and improvements. Please note that these are
generally complex transactions and need to be properly
structured. For
more information on improvement exchanges, please
contact us
> Contact
Us
Personal
Property Exchanges
We
also act as qualified intermediary and exchange
accommodation titleholder for personal property
exchanges, such as
aircraft, equipment, businesses, boats, artwork and other
collectibles. Personal property exchanges are
similar to real property exchanges, but require care
with respect to sales and use tax and other issues. We work with your local sales tax advisor to determine
the best state and local tax approach.
Aircraft
Exchanges
 Aircraft
has often been fully depreciated for federal tax
purposes and when it is sold, the entire sales price
will be taxable gain, and most or all of the gain will
be taxed at higher ordinary income rates. Therefore, an
exchange of the aircraft can defer substantial taxes.
We act as both qualified intermediary in forward
exchanges and exchange accommodation titleholder in
reverse exchanges of aircraft. The safe harbor created
by the IRS allows us to hold title to either the
relinquished aircraft or the replacement aircraft for up
to 180 days while the client locates a buyer for the
relinquished aircraft. We work with the client’s
counsel to minimize federal as well as state sales and
use taxes on these transactions. For example, in some
states, a forward or reverse exchange may be structured
as a trade-in to obtain a credit against sales and use
taxes.
Our
affiliates, EPC Aircraft Sales LLC, a Washington limited
liability company, and Oregon Aircraft and Vessel
Exchange LLC, an Oregon limited liability company,
specialize in exchanges of commercial and corporate
aircraft and both are registered as a dealer with the
FAA, and are also registered with the Capetown Registry.
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Artwork
Exchanges
Our
affiliate, 1031 Artwork Services LLC, specializes in
exchanges of artwork held for investment. The
artwork can be sold through dealers or auction houses.
The exchanges can be structured as either forward or
reverse exchanges, and we work with local counsel to
minimize sales and use taxes on the artwork exchanges.
INFORMATION FOR OTHER
QUALIFIED INTERMEDIARIES
We
work with many qualified intermediary (QI) companies throughout the United
States, as both exchange accommodation titleholder (EAT) and
consultant. We
have participated as EAT in
exchanges of all types of properties, such as real
estate, equipment, airplanes, artwork, and boats. We have also
worked on many improvement or “build to suit”
exchanges. A significant portion of our business is
safe harbor reverse exchanges.
We
structure the arrangement in accordance with your
needs. We can work directly with the client, or only
through you. We provide you with the expertise and
backup necessary to make the exchange run as smoothly as
possible. You act as QI and prepare your usual QI
documentation. We prepare all the reverse exchange
documentation.
We
use a sole purpose limited liability company as
EAT and we often handle the set up of the LLC.
The client is responsible for any state transfer taxes,
although we work with the client and local counsel to determine how to possibly
avoid or mitigate these costs.
For more information on this service, please
>
Contact Us
CONSULTING
Our
attorney, Mary B. Foster, is available to consult with
you on most exchange matters. To contact Mary direct,
please email her at
mfoster@1031services.com
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