GENERAL SUMMARY OF 1031 EXCHANGE
(Starker exchanges or Tax deferred exchanges):

The following is not intended as legal or tax advice as to the appropriateness of a 1031 tax exchange. It is meant simply for informational purposes. Anyone who wishes to use a 1031 tax exchange is strongly urged to consult a tax expert or tax attorney. This summary was prepared by the law firm of Shreves, Schudel, DeVol, Saunders & Jackson, PLLC for RGS TITLE LLC.

Eligible Property: Property held for productive use in a trade or business or for investment may be exchanged for other "like-kind" or "like-class" property under IRC ?031(a)(1). (E.g., Real property would have to be exchanged for real property)

Timing of Exchange: Generally, at the time of the sale of the "relinquished property" the seller or "Exchangor," does not yet know what property he or she wants to acquire or the closing on the replacement property cannot be accomplished simultaneously with the sale of the relinquished property. In that case, an "Intermediary" is used to defer the exchange and hold the sales proceeds from the sale of the relinquished property.

Identification of Replacement Property: If it is a deferred tax exchange, the Exchangor must identify the replacement property within 45 days of the settlement on the relinquished property. The Exchangor can identify up to three (3) possible replacement properties. Identification is given to the Intermediary.

Closing on Replacement Property: The Exchangor must close on the purchase of the replacement property within 180 days of the closing on the relinquished property or the due date on the tax return for the Exchangor.

Services Provided: Exchange Intermediary facilitates the 1031 deferred tax exchange by preparing all the necessary documents for the transaction. Exchange Intermediary holds the net sales proceeds on behalf of the Exchangor and ensures that the funds are available for settlement on the replacement property. Exchange Intermediary and the lawyers who draft the documents do not provide tax advice as to the appropriateness of a 1031 exchange. That advice must come from a tax attorney or certified public accountant.

Fee: The fee for the Exchange Intermediary's services is in most instances $850.00 (Fees are subject to change)