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Types of 1031 Exchanges

Four types of 1031 Exchanges accommodate most investment scenarios.

Simultaneous Exchange

A Simultaneous Exchange occurs when two properties are exchanged simultaneously. This can happen when two properties are swapped, property for property, which is called a two-party exchange. This can also happen when a property is sold and the replacement property is purchased simultaneously. To ensure safe harbor protection, a Qualified Intermediary should facilitate the exchange.

Forward Delayed Exchange

The most common type of exchange, the Forward Delayed Exchange, happens when a property is sold (Relinquished Property) and another property is purchased (Replacement Property) within 180 days following the sale of the Relinquished Property. For a safe harbor Forward Delayed Exchange, the sale proceeds must be held by a Qualified Intermediary between the sale of the Relinquished Property and the subsequent purchase of the Replacement Property.

Construction Exchange

Construction Exchanges, or Build-to-Suit Exchanges, occur when the taxpayer uses the funds from the sale of the Relinquished Property to construct improvements on the Replacement Property. The property on which the improvements are constructed cannot be held by the taxpayer but must be held by a third party called an Exchange Accommodation Title Holder until either the improvements are complete or until the end of the 180 Exchange Period, after which the title holder is deeded the Replacement Property with the improvements. Due to its complexity, a Construction Exchange incurs higher fees.

Reverse Exchange

In a Reverse Exchange, the Replacement Property is purchased before the sale of the Relinquished Property. The Replacement Property must be held by an Exchange Accommodation Title Holder until the sale of the Relinquished Property, which must take place within 180 days following the purchase of the Replacement Property. Due to its complexity, a Reverse Exchange incurs higher fees.

About Stephen A. Wayner, Esq., CES

Stephen Wayner is an attorney, Certified Exchange Specialist (CES), and Managing Director of Liberty 1031. Mr. Wayner is recognized as a leading authority on the subject of 1031 exchange transactions. He is a current board member of the Federation of Exchange Accommodators (FEA) and is the author of numerous books and articles on 1031 Exchanges and real estate investing. Mr. Wayner has been cited as an expert on 1031 Exchanges in publications including USA Today, NewYork Times, Business Week, and The Wall Street Journal among many others.

Explore These Additional 1031 Exchange Topics

Types of Exchanges

Explore the various types of exchanges to better understand your options.  Read more

Sample Savings

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Understanding 1031

Learn the key rules for successful 1031 real estate exchanges. Read more.

Benefits of a 1031 Exchange

Review the numerous advantages 1031 exchanges have to offer. Read more.

What to Expect In The 1031 Process

Learn what happens after you begin the 1031 Exchange process. Read more.

The 1031 Exchange Timeline

Put exchange timeframes into perspective with this helpful visual. Read more.

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