What is improvement Exchange?
A 1031 exchange where the Qualified Intermediary or EAT holds the title to the replacement property on behalf of the property seller, and during which time improvements are made to the replacement property. Also known as a Build-to-suit exchange.
This exchange occurs when the Exchanger uses the exchange proceeds to improve and make capital improvements an existing property or to improve a new property. The improvement exchange may occur in the context of a delayed or reverse exchange.
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How do you identify the Replacement Property?
Exchangor must be specific when identifying replacement property to be built and must provide the legal description for the underlying land and disclose as much detail regarding construction of the improvements, including detailed plans and specifications for the structure to be built or repaired.
Identify the Property in a Construction Exchange
If the Exchangor should consider various alternative building designs prior to the exchange and identify in the exchange chosen alternative in order to avoid failed exchange. The identification should contain as much detail as possible so that minor variations in the completed project can be classified as typical construction changes.