Tuesday, March 23, 2010 at 06:08PM | Staff Buying and Building on a Property Through a 1031 Exchange
This request has become a popular question over the last few months. I think it reflects the tremendous investment opportunities that exist in the marketplace today, and the ability and/or willingness of investors to improve or construct on the replacement property that they acquired through their 1031 Tax Deferred Exchange transaction.
In any event, the issue is that the investor has sold his or her relinquished property as part of a 1031 Tax Deferred Exchange, and would like to use the sale proceeds from the disposition of the relinquished property to acquire like-kind replacement property and also build, construct or otherwise improve the replacement property acquired in the 1031 Exchange.
This transaction is referred to as an Improvement 1031 Exchange, Build-To-Suit 1031 Exchange or Construction 1031 Exchange. The investor can acquire the like-kind replacement property and use his or her excess 1031 Exchange proceeds to build or improve the target replacement property so that the excess 1031 Exchange will also be tax-deferred through the 1031 Tax Deferred Exchange.
