The 1031 exchange is a tool available to all taxpayers. It allows you to defer your capital gains on the sale of real property, provided you move all of your proceeds into a continued investment property. Construction exchanges are just one type of exchange in which the taxpayer doing the exchange makes improvements to their replacement property before completing the exchange. Contact our Nebraska 1031 exchange professionals for help with your build-t0-suit construction exchange today – 877.373.1031.
How a Construction Exchange Works
A construction exchange (also known as a build-to-suit exchange) is a 1031 like-kind exchange in which the taxpayer constructs improvements to their replacement property prior to closing. In an imperfect real estate world, where your replacement property may not be perfect, a construction exchange allows you to make improvements to your property as a part of your 1031 exchange.
Construction Exchange Rules & Guidelines
Construction exchanges need to follow the guidelines set out for all 1031 exchanges. Specifically, you need to hit all of the following benchmarks:
- 180 Day Timeline. Your exchange needs to finish within 180 days after the sale of your relinquished property. The first 45 days of that time period are used to identify your replacement property. This means that any construction improvements need to be completed within this time frame as well.
- Like-Kind for Like-Kind. Both your replacement property and your relinquished property need to be like-kind to each other.
- Qualifying Purpose Requirement. Your properties involved in the construction exchange both need to be held for a qualifying purpose – either business or investment purposes.
Nebraska 1031 Exchange Intermediaries
Build-to-suit construction improvement exchanges can be complex. You need to juggle a lot of things to make sure construction finishes in time and all of your 1031 exchange benchmarks are met. A qualified intermediary can help organize your 1031 exchange documents and advise you on best practices throughout the process. Our Nebraska 1031 exchange professionals have been guiding clients through their 1031 exchanges for decades. Contact us today for help getting your exchange off the ground – 877.373.1031.