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Types of Tax-Deferred Exchanges
 The Two-Party Exchange- Two-party
exchanges are rare, since in the typical Section 1031 transaction, the
seller of the replacement property is not the buyer of the taxpayer's
property.
The two-party exchange is the purest form of exchange. As the name
implies, only two parties are involved and they exchange their properties.
Both steps of the transaction occur simultaneously.
Title to the relinquished property is conveyed by the taxpayer to the
seller, and title to the replacement property is conveyed by the seller to
the taxpayer.
The Simultaneous
Exchange with Intermediary- Most exchanges today
employ the services on an intermediary- a straw party whose sole purpose in
the transaction is to facilitate the exchange.
Here, title to the relinquished property is transferred directly to the
buyer. The buyer pays cash to the intermediary. The intermediary pays cash
to the seller who transfers title to the replacement property directly to
the taxpayer. The taxpayer thus avoids receiving any cash during the
transaction which would be immediately taxable.
The Deferred Exchange
with Intermediary-
Sometimes, at the time
when the relinquished property is transferred to the buyer, the taxpayer
does not yet know what property he or she wants to acquire. When that is the
case, a deferred exchange is necessary.
The structure of the deferred exchange with intermediary is essentially
the same as the simultaneous exchange with intermediary, except that ,
because the replacement property is not known at the time the relinquished
property is transferred to the buyer, the two legs of the exchange take
place at different times.
The taxpayer has 45 days to identify the property he or she wants s the
replacement property The transfer of the replacement property must still
close within 180 days of the transfer of the relinquished property.
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