What are the different 1031 Exchange Types?

DELAYED
In a delayed exchanged the replacement property is closed on at a later date than the exchange property.  The delayed or “Starker” exchange is the most common type of exchange.  There is a strict time line for delayed exchanges, specifically a 45-day Identification Period and a 180-day Exchange Period.

IMPROVEMENT
In an improvement exchange, the taxpayer acquires a property and arranges for new construction or improvements before it is received as replacement property. It is necessary for the intermediary to close on and to take and hold title to the property until the improvements are made.  The intermediary makes payments to contractors and other suppliers out of the exchange funds. Title is then transferred to the exchanger at the higher value upon completion of improvements or the 180th day, whichever occurs first. This can be useful if replacement property is of lesser value than the relinquished property. Improvement or construction can increase the value of the replacement property to reduce or eliminate a taxable event.

REVERSE
The reverse exchange is when the replacement property is purchased and closed before the relinquished property sells. The intermediary, acting as an Accommodating Titleholder (AT), acquires the replacement property and holds title until the relinquished property sells, at which time a simultaneous or delayed exchange is structured. It is important for the investor to be aware that reverse exchanges are technically more complicated.

SIMULTANEOUS
A simultaneous exchange occurs when the closing of the exchange property and replacement property occur concurrently. Simultaneous exchanges are rare since it is difficult to coordinate simultaneous deed transfers on multiple properties.