IRC Section 1031 Like-Kind Exchange

Security of 1031 proceeds:

For each exchange, Computershare acts as your Qualified Intermediary, an independent third-party, and deposits the exchange proceeds in a segregated Computershare trust account.

Our QI services:

• Prepare the 1031 exchange agreement, including assignments, notices, and all forms necessary to complete the exchange.
• Provide examples of applicable language for inclusion in the relinquished property sales contract and/or the replacement property purchase contract.
• Set up a unique exchange account for each transaction and deliver monthly account statements and annual 1099s.
• Work closely with your legal and tax advisors to facilitate an exchange transaction that is structured in compliance with Section 1031.

We can also serve as trustee of your Qualified Trust, which is an additional safe harbor under Section 1031. We can hold the taxpayer's funds in a Qualified Trust so that in the event of bankruptcy, the creditors of the intermediary most likely cannot reach the funds.

Computershare acts as the Qualified Intermediary who receives and holds the exchange proceeds generated by the sale of the relinquished property. In a typical tax-deferred like-kind exchange, the taxpayer sells business or investment property and then acquires replacement property of equal or greater value within 180 days.

Computershare also assists taxpayers in what are commonly referred to as reverse exchanges. A reverse exchange involves a sequence opposite to that of a deferred exchange, where in most situations, the purchase of the replacement property must occur before the sale of the relinquished property. This transactional structure allows the taxpayer a high degree of flexibility in executing a Section 1031 exchange transaction.

In addition to providing 1031 exchange services, Computershare provides training for taxpayers and tax advisors interested in Section 1031 exchanges. We have presented nationally recognized continuing education seminars on Section 1031 like-kind exchanges.

The use of a Qualified Intermediary is the most common method to quickly and easily complete a valid tax-deferred exchange. As a Qualified Intermediary, Computershare typically holds funds during the course of deferred exchanges.

Under Section 1031, all real property (as defined by state law) is considered "like-kind" with other real property of the same nature or character. The property must be held for investment or productive use in a trade or business.

The following are examples of qualified “like-kind” real property exchanges:

• Raw land for rental property
• Single family rental for multi-family rental
• Retail space for motel/hotel
• Farms/ranch for golf course
• 30-year leasehold interest for fee simple interest
• Non-income producing raw land for income-producing rental property

How to facilitate a deferred 1031 exchange with Computershare as the Qualified Intermediary:

1. You sign a contract to sell an asset(s) to the buyer.
2. Prior to the property closing, you retain Computershare to be the Qualified Intermediary.
3. At the closing, the exchange funds are wired or a check is sent to Computershare.
4. The taxpayer completes the Identification of Replacement Property exhibit and returns it to Computershare within the first 45 days after the transfer of the relinquished property.
5. You have a maximum of 180 days from the transfer date of the relinquished property to acquire any and all replacement properties.
6. At the closing of the property to be purchased, Computershare wires the exchange funds or sends a check to complete the exchange.