Understanding Build-to-Suit and Improvement Exchanges

A This refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to cause improvements to be placed on the land constituting the replacement property so that the taxpayer can complete the trade where both the value of the land and of the improvements will count for the amount the taxpayer traded for. These types of exchanges are structured pursuant to IRS Rev. Proc. 2000-37 and are sometimes known as “property parking exchanges” and are sometimes known as “property parking exchanges” and require the exchange facilitator to take on an additional role as a Qualified Exchange Accommodation Titleholder. Build-to-Suit Exchange (BTS) is where an Exchanger purchases land to build the desired structure as the Replacement Property.

An Improvement Exchange entails the (“Exchangor” or “Taxpayer”) Person intending to conduct a 1031 tax deferred exchange, who transfers a relinquished property and thereafter receives a replacement property. Exchanger purchasing Replacement Property with the intention to improve the structure.

Once the Exchanger takes title to the property, any improvements are considered payment for labor and materials and such payment is not the purchase of like kind property. Learn about the process of these type of Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange s and the reasons they are used in some situations.