1031 Exchange Types

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A simultaneous exchange is said to take place when both the relinquished property and the replacement property have their ownerships transferred concurrently. Simultaneous exchanges are rare in practice, thanks to the difficulty in arranging for concurrent deed transfers on multiple properties.


The most common type of exchange type nowadays is the delayed exchange – also known as a “starker exchange”. As the name suggests, a delayed exchange allows for a period of time (fixed by law) to elapse between relinquishing a property and acquiring a replacement property. This type of asynchronous transaction allows for greater flexibility for all parties involved in the exchange process, making it one of the most widely used exchange mechanism. Please not that there are several different variations on the basic delayed exchange.

Improvement / Construction

In instances where the exchanger is interested in acquiring replacement property and improving it from the proceeds of the sales of the relinquished property, an improvement/construction exchange may be used. The title of the relinquished property is transferred to an intermediary, who uses proceeds of the sale of the relinquished property to pay contractors and other suppliers to perform new construction or make improvements on the replacement property. Upon completion of the construction work (or the 180th day – whichever comes first), the title of the replacement property is transferred to the exchanger at higher value. In cases where the replacement property is lower in value than the relinquished property, a construction exchange can be an effective way to increase the value of the replacement property while significantly reducing or eliminating a taxable event.


A reverse exchange is used when an investor wants to gain acquisition of a replacement property before the relinquished property is sold to a third party. The reverse exchange is initiated when an intermediary, acting as the Accommodating Titleholder (AT), takes control of the replacement property and ‘parks’ it. Once the relinquished property is sold, the AT starts a simultaneous or delayed exchange is structured to transfer ownership of the replacement property to the investor. An alternative method is for the intermediary to act as a ‘straw buyer’ for the relinquished property and immediately embark on a simultaneous exchange with the replacement property. Regardless of which method is used, reverse exchanges make it possible for an investor to acquire title on a replacement property before transferring title to their relinquished property.

Business / Personal Property

According to Internal Revenue Code Section 1031, investors are permitted to exchange all kinds of property, not just real estate. Business assets, livestock, valuable works of art, equipment and all other personal property are all fair game in a Section 1031 exchange. It does become tricky, however, setting up a business or personal property exchange, since they require very specific asset allocations. Additionally, “like-kind” definitions are much more restrictive when it comes to personal property compared to real estate. It is highly recommended for both parties in a business or personal property exchange to consult with a tax advisor prior to initiating the exchange or selecting the intermediary.