Reverse Improvement Exchanges


If you find a replacement property that you would like to acquire before you sell your current property, you can utilize a Reverse Exchange to maximize tax savings. If you would like to build on or make improvements to a replacement property, you can use the exchange proceeds by structuring an Improvement (Build-to-Suit or Construction) Exchange. Also known as “parking” transactions, both Reverse and Improvement Exchanges are two of the more complex yet highly useful exchange structures available.

Reverse Exchanges require an Exchange Accommodation Titleholder (an “EAT”) to hold title to either the client’s old relinquished property or new replacement property pending the completion of the exchange. IRS regulations prohibit an Exchanger from using exchange funds to improve property that the Exchanger already owns. If an Exchanger wants to use exchange funds to improve replacement property as part of a 1031 Exchange, the Exchanger can enter into an Improvement or Build-to-Suit Exchange whereby the EAT takes title to the new replacement property while improvements are being constructed so that the EAT can transfer the replacement property to the Exchanger at the higher improved value.

To ensure a smooth and successful parking transaction, IPX1031® coordinates the entire exchange process with the client’s tax and legal counsel, lender, environmental consultant, title company and settlement officer. IPX1031® utilizes the best and most up-to-date exchange structures and business practices available to help you achieve your desired result. IPX1031® also utilizes separate limited liability companies (LLCs) for each exchanger so that all properties are segregated and never comingled with other properties the EAT holds. The protection afforded by utilizing this type of entity ensures that the client’s property will be safe while IPX1031® holds title and completes the exchange.

Due to the inherent complexity of Reverse and Improvement Exchanges, it pays to entrust your valuable business assets with the experts. Our commitment to Reverse and Improvement Exchanges is evidenced by our creation of the National Reverse and Improvement Exchange Division. To best serve our clients, the IPX1031® National Reverse and Improvement Division has two locations – one in Chicago, IL serving the Eastern United States and one in Tempe, AZ serving the Western United States. Each location has staff attorneys and tax deferred exchange professionals, including Certified Exchange Specialists®, who have extensive experience in structuring and managing these complicated exchanges, for all types of single and multiple asset, real property, and tangible and intangible personal property transactions. Since its inception, the National Division has processed over 4,000 parking transactions.