What is the difference between a sale and an exchange?
A sale is an exchange of real property for cash. A sale and repurchase of like-kind property following the Internal Revenue guidelines is an exchange; a "non-taxable" sale.
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What provisions are required in a Purchase and Sale Agreement to enter an exchange?
A purchase and sale agreement should contain language establishing the exchangor's intent and notifying the buyer of the exchange. Examples are:

When Selling:
"It is the intent of the Seller to perform an IRC Section 1031 tax deferred exchange by trading the property herein. Buyer agrees to execute an Assignment Agreement at the request of Seller at no additional cost or liability to Buyer."

When Buying:
"It is the intent of the Buyer to perform an IRC Section 1031 tax deferred exchange by trading the property herein. Seller agrees to execute an Assignment Agreement at the request of Buyer at no additional cost or liability to Seller."

Can an investor trade from several small properties into one large one?
Yes. An investor can also trade out of one large property into several smaller ones. When selecting more than one replacement property, investors must adhere to the Treasury guidelines regarding property identification.
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How are the exchange funds protected?
With a variety of bonded exchange accounts including semi-fettered accounts, letters of credit, Treasury-backed and FDIC insured accounts.
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Can an investor take some of the cash and exchange the remainder?
Yes. Any cash received can be subject to capital gains tax. If done properly, this will not affect partial deferment.
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Can an investor receive cash from refinancing their property?
Refinancing is a non-taxable event if done correctly.
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Can an investor carry back a note on their property?
Yes. There are several different ways to handle a note in an exchange. Tax or legal counsel should always be consulted whenever an investor carries a note.
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Can a partnership, L.L.C., corporation or trust perform an exchange?
Yes. These entitles can all exchange property they own for different property.
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Can an investor trade out of partnership?
Partnership interests generally are considered personal property and therefore do not qualify as "like-kind." If one partner wants to exchange separately they should consult their counsel to avoid triggering a taxable event.
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Can assets other than real estate be exchanges?
Yes. Taxes can be deferred using IRC Section 1031 on most personal property including, but not limited to, businesses, planes, boats, trucks, and equipment.
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Can an investor cancel the exchange whenever they want?
The exchange agreement allows cancellation under certain circumstances, however, limits must be set. Having the right to cancel without restrictions could be construed as control of cash which would disallow the exchange.
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Can an investor build or improve a replacement property?
Yes. The regulations describe this as a Construction or Improvement exchange. The Intermediary will keep the investor within the safe harbor guidelines.
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