A construction improvement exchange is a unique type of 1031 exchange that allows taxpayers to defer their capital gains tax, while exchanging into a property that fits their needs. This article is focused on the 1031 construction exchange – what it is and when it can be beneficial for taxpayers looking to defer gains on the sale of real estate.
A construction exchange (also known as a build-to-suit exchange) is a variation on the typical 1031 real estate exchange that allows the person doing the exchange to construct improvements to their replacement property before exchanging into it. Construction improvement exchanges are great because they allow the exchangor to exchange into a replacement property that fits their needs better than the existing property. Be aware that any construction needs to be completed within the typical 180 day like-kind exchange period.
The Importance of Involving a Qualified Intermediary
Construction exchanges are often more complex than typical forward like-kind exchanges. That makes it even more important to hire a qualified intermediary for your exchange. A qualified intermediary is a 1031 exchange professional whose job it is to facilitate like-kind exchanges. When you hire a qualified intermediary they will prepare all of your like-kind exchange documents, answer all of your questions, and advise you so that you are fully prepared when you get to the closing table.
1031 Construction Exchanges in Minnesota
For help with your construction improvement exchange, don’t hesitate to contact us today. The team at Commercial Partners Title has decades of experience working on commercial transactions across the country. When our clients need assistance with a 1031 exchange, we work directly with CPEC1031, LLC to facilitate the exchange of property. Depending on your situation, a 1031 exchange could help you avoid a significant tax bill when you sell your property. Contact us today to learn more about the tax-saving benefits of a 1031 exchange.