A 1031 Exchange is a way of protecting your money. You should always consult with your tax attorney, financial advisor or CPA. This page should only be used as an introduction to exchanges:
With this type of exchange the sale of the relinquished property and the purchase of the new property happen on the same day. The Simultaneous Exchange will normally require the service of a qualified intermediary.
This is commonly called the Starker Exchange and the exchanger has a maximum of 180 days from the close of the relinquished property or due day of the tax return for that year in which the property was sold (whichever occurs first) to acquire the replacement property.
This is also known as the construction exchange. A way of using this exchange type is when the replacement value of the relinquished property is of a lesser value. In this case the intermediary can acquire the replacement property on the behalf of the exchanger and have improvements made during this exchange period. These additions to the value can be in the form of improvements to an existing building or new construction. Once the improvements have been completed the replacement is transferred to the exchanger before the completion of the exchange period.
In the type of exchange the investor will first locate a property and provide the funds to the intermediary to buy the replacement property and go onto the title before they sell the relinquished property.