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Transfer Exchange, Inc.

748 North Court Street
Medina, Ohio 44256
Phone:  330-722-9090
Toll Free 800-731-1031 Fax: 330-725-3145

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Transfer Exchange Brochure:

(Printable Brochure in .pdf format)

TRANSFER EXCHANGE, INC. is a Qualified Intermediary for tax deferred exchange transactions, as defined by Internal Revenue Code Section 1031.

TRANSFER EXCHANGE, INC. was incorporated in 1997 to meet the increasing needs of exchanges in the Medina area and has quickly developed a reputation for great service and integrity.

TRANSFER EXCHANGE, INC. is able to offer the highest level of safety and security. Each exchanger's proceeds are deposited locally in separate bank accounts. The exchanger is able to keep all interest derived from the account which is applied at the conclusion of the exchange.

TRANSFER EXCHANGE, INC. handles all exchange variations including simultaneous, delayed, build-to-suit, and reverse exchanges. Exchange documentation can be generated within a few hours, if necessary. We are available from 8:30 am to 5:00 pm Monday through Friday to answer any exchange related questions or check on the status of a current transaction.

TRANSFER EXCHANGE, INC. can meet with agents and clients in their own office to discuss particular exchange transactions.

 

What’s a 1031 Exchange ?

Section 1031 of the tax code provides one of the best strategies for the deferral of capital gain taxes which would ordinarily arise from the sale of investment property. Exchanging defers the realization of the capital gain tax, leaving the property owner with substantially more proceeds to reinvest in a replacement property.


EXCHANGE TERMINOLOGY

  • Assignment Agreement - A document used to transfer contractual rights (but not necessarily obligations) to a third party. Often used to assign the Purchase/Sales Contract between the exchanger, the Qualified Intermediary and either the buyer or seller.

  • Basis - Method of measuring investment in an investment property for tax purposes. The following formula provides an approximate estimate of the adjusted basis: [Purchase Price + Improvements] - Depreciation Deducted = Adjusted Basis.

  • Boot - Fair market value of non-qualified (not like-kind) property received in an exchange. Examples: cash, notes [seller financing], furniture, supplies, reduction in debt obligations.

  • Capital Gain/Loss - The increase (or decrease) in the amount received from a sale or exchange over the adjusted basis of the property.

  • Constructive Receipt - A term referring to the control of proceeds by a taxpayer even though funds may not directly be in their possession.

  • Exchange Agreement - A document used to establish the contractual relationship between the parties to an exchange which restricts the Exchanger's access to the exchange funds and outlines the responsibilities of the Qualified Intermediary.

  • Exchanger - The party completing the exchange. The IRS uses the term "taxpayer."

  • "Like-kind" Property - Any property used for the productive use in a trade or business or for investment is deemed to be like-kind with any other property to be used for the productive use in a trade or business or for investment. The way the property is utilized, and not the type of property, determines if it is like-kind. Like-kind refers to the nature or character of the property and not its grade or quality. Examples of like-kind property can include: single family residential, multi-family residential, retail, manufacturing, condominiums, offices, industrial warehouses and bare land. As a general rule, real property is like-kind as to all other real property except: (1) An interest in a partnership (2) Primary residences and vacation and/or second homes (3) Inventory (defined as property held for sale).

  • Qualified Intermediary - An entity who is not an agent of the taxpayer or a is qualified person and enters into a written agreement with the taxpayer (the "Exchange Agreement"). The Exchange Agreement must require that the Qualified Intermediary acquires the relinquished property from the taxpayer, transfer the relinquished property, acquire the replacement property, and transfer the replacement property to the taxpayer.

  • Relinquished Property - The property "sold" by the exchanger. This is also called the "exchange," "downleg," or the "phase I " property.

  • Replacement Property - The property acquired by the exchanger. This is also called the "acquisition," "upleg," or "phase II" property.

  • Reverse Exchange - "Safe Harbor" Reverse Exchange Rules The IRS Revenue Procedure 2000-37 creates the presumption that if Transfer Exchange, Inc. owns the "parked" property for not more than 180-days the transaction will qualify as a 1031 exchange if the transaction falls within this "safe harbor" of the Rev. Proc. If the Exchanger does not acquire the parked property from Transfer Exchange, Inc. within the 180-day period, the safe harbor" presumption will not be available and the transaction is referred to as a non-safe harbor transaction. The IRS Revenue Procedure 2000-37 creates the presumption that if Transfer Exchange, Inc. owns the "parked" property for not more than 180-days the transaction will qualify as a 1031 exchange and the transaction falls within the "safe harbor" of the Rev. Proc. If the Exchanger does not acquire the parked property from Transfer Exchange, Inc. within the 180-day period, the "safe harbor" presumption will not be available and the transaction is referred to as a "non-safe harbor" transaction. Transfer Exchange, Inc. acts as an Exchange Accommodation Titleholder ("EAT") in Safe Harbor "reverse" exchanges if the transaction will be a "non-safe harbor" other ownership arrangements can be created.  If Transfer Exchange, Inc. acquires the Replacement Property ("exchange last"), the Exchanger must "identify" the intended relinquished property within 45 days of the date Transfer Exchange, Inc. acquires the Replacement Property. The Exchanger can provide 100% financing to Transfer Exchange, Inc. for the purchase of the "parked" property. The "safe harbor" also permits the leasing of the parked property by Transfer Exchange, Inc. to the Exchanger on a net-lease basis with nominal rent. Transfer Exchange, Inc. must, however, report the ownership of the parked property on its own tax return.

  • "Starker" Type Exchanges - Popular term for the delayed exchange variation upheld in Starker v. United States, 602 F.2d 1341 (9th Cir. 1979).

  • Section 1031 Tax Deferred Exchange - A deferred exchange is defined as an exchange in which, pursuant to an agreement, the taxpayer transfers property held for productive use in a trade or business or for investment (the "relinquished property") and subsequently receives property to be held for productive use in a trade or business or for investment (the "replacement property").



1031 DO’S AND DON’TS

-DO advanced planning for the exchange. Talk to your accountant, attorney, broker, lender and Qualified Intermediary.
-DO attempt to sell before you purchase. Occasionally Exchangers find the ideal replacement property before a buyer is found for the relinquished property. If this situation occurs, a reverse exchange (buying before selling) is the only option available. Although there is considerable legal precedent for reverse exchanges, Exchangers should be aware they are considered a more aggressive exchange variation because no clear IRS guidelines exist.

-DO NOT miss your identification and exchange deadlines. Failure to identify within the 45 day identification period or failure to acquire replacement property within the 180 day exchange period will disqualify the entire exchange. Reputable Intermediaries will not act on back-dated or late identifications.
-DO NOT plan to sell and invest the proceeds in property you already own. Funds applied toward property already owned purchase goods and services, not like-kind property.
-DO NOT dissolve partnerships or change the manner of holding title during the exchange. A change in the Exchanger's legal relationship with the property may jeopardize the exchange.

REASONS TO EXCHANGE

  • Cash Flow: Exchange land for improved property.

  • Appreciation: Exchange commercial property for single family rentals that appreciate faster.

  • Easier Sale: Exchange for a property that is easier to market and sell.

  • Less Management: Exchange rentals for raw land or for property that can be professionally managed.

  • Better Location: Exchange property from a run-down location to a better location.

  • Accomplish Goals: Exchange one large property into multiple properties to leave for heirs.


www.eztransfer.com

E-mail: rskidmore@eztransfer.com
330-722-9090 Telephone
800-731-1031 Toll Free
330-725-3145 Fax

 

748 North Court Street  -  Medina, Ohio 44256  -  330- 722-9090
Toll Free 800-731-1031  -  Fax:  330-725-3145