Section 1031 of the Internal Revenue Code provides a method by which a “seller” can defer the recognition of gain or loss on the transfer of property. Under Section 1031 no gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged solely for property of a like-kind to be held either for productive use in a trade or business or for investment. Often the seller of the property is unable to effect a simultaneous exchange of property because he may be unable or unwilling to delay a sale until suitable exchange property can be located and acquired, he may be unable or unwilling to wait until an improvement is completed on the target property, or no party in the sale transactions is willing to cooperate in executing any exchange documents.

In 1984 and again in 1986 Congress amended the requirements of Section 1031 to deal with the result of the decision in the “Starker Case” and the Internal Revenue Code now provides a provision for delayed exchanges. In order to comply with the delayed exchange requirements suitable like-kind property must be designated on or before 45 days after the date on which the original sale takes place and suitable exchange property must be acquired within 180 days after the date of the sale or prior to the due date for the taxpayer’s return for the taxable year in which the transfer occurred. In many simultaneous exchanges where multiple parties are involved and in most delayed exchanges, transferring parties have found it helpful to have an independent third party “strawman” involved to preserve the exchange nature of the transaction for the transferor or to assist in the completion of multi-party exchanges which may not ultimately be simultaneous. The strawman serves to qualify the exchange so as to avoid actual or constructive receipt of proceeds of sale by the taxpayer and thus characterize the transaction as a taxable sale.

In many simultaneous exchanges where multiple parties are involved and in most delayed exchanges, transferring parties have found it helpful to have an independent third party “strawman” involved to preserve the exchange nature of the transaction for the transferor or to assist in the completion of multi-party exchanges which may not ultimately be simultaneous. The strawman serves to qualify the exchange so as to avoid actual or constructive receipt of proceeds of sale by the taxpayer and thus characterize the transaction as a taxable sale.

R.E. Exchange Services, Inc. was formed in 1985 and it and its principals have participated in exchange transactions involving over $1 billion. R.E. Exchange Services, Inc. offers a convenient, trustworthy and timely exchange accommodation service, providing detailed documentation and recordkeeping, timely and reliable service and interface with escrow and title companies and the exchanging parties. R.E. Exchange Services, Inc. was incorporated in California in 1985 and is qualified to participate in transactions involving out-of-state property and its principals are readily accessible for conference prior to, during and after any exchange transaction. In addition to the “traditional” delayed exchange transactions, R.E. Exchange Services, Inc. and its principals are experienced in structuring reverse exchange and construction exchange transactions. Their expertise can be helpful in qualifying a complicated transaction to fit within the exchange guidelines issued by the IRS.

In a typical exchange transaction the proposed seller arranges for the sale of his property to a ready buyer with advice from his own tax advisors or the brokers involved in the transaction that an exchange may be appropriate. If the seller desires to effect an exchange using an exchange accommodator, R.E. Exchange Services, Inc. would enter into an Exchange Agreement with the seller wherein R.E. Exchange Services, Inc. is substituted as the seller of the sale property, agrees to hold the proceeds from the sale and use such proceeds to acquire property for the seller subsequent to the close of the initial sale escrow. The seller then identifies the exchange property and arranges a purchase agreement with the new seller in coordination with R.E. Exchange Services, Inc. This property is designated by the exchanger within the time frame required by Section 1031 and upon satisfaction of the purchase contingencies, R.E. Exchange Services, Inc. acts as the buyer in the upleg purchase transaction. R.E. Exchange Services, Inc. utilizes the exchange funds it holds to acquire the upleg property and concurrently with that acquisition conveys the property to the original seller to complete the exchange.

While many exchange companies are available for use as the accommodating party in reverse, delayed or complicated simultaneous exchanges, R.E. Exchange Services, Inc.‘s service history and the expertise, accessibility and reliability of the company and its principals is guaranteed to provide the quality service that selling parties and their representatives desire.