International Financial Accounting Standards Versus Generally Accepted Accounting Principals

Though we have known for centuries of the globes spherical dimensions, the last few decades have proven that the earth might be “flat” after all. People communicate all over the world like never before, allowing transactions to flow freely from country to country. Because this is a first time occurrence as never seen in history, people are adapting rapidly to new types of problems or ways that we could make these interactions more efficient. One problem is that because of the free flow of business transactions through different countries and different law enforcements, one set of accounting standards needs to be put in place to have easier access to financial information. International Financial Reporting Standards are one set of accounting standards, put in place by the International Accounting Standards Board, which is becoming the global standard for the preparation of public company financial statements. The current lack of a uniform set of accounting standards creates problems for companies preparers and users. Many multinational companies, creditors, and investors support the idea for a global set of accounting standards, which would make it easier to compare the financial statements of a foreign competitor, to better understand opportunities, and to cut cost by using one accounting procedure company-wide.

Currently over 12, 000 companies in 113 countries have adopted international financial reporting standards as their new accounting standards. The SEC believes that this number will continue to increase. Japan, Brazil, Canada and Indian countries plan to start using IFRS in 2010 & 2011. Mexico will adopt IFRS in 2012. This same year the U.S. will include IFRS questions on their CPA exams. President Obama released the financial regulatory reform proposals, on June 17, 2009, which called for accounting standard setters to “make substantial progress toward development of a single set of high-quality global accounting standards” by the end of 2009. The United States are expected to converge and/or adopt the international standards, IFRS and cease to use their current generally accepted accounting principals, as early as 2012. The proposed deadline, which requires U.S. public companies to use IFRS, has been postponed to 2015. In order to do this, differences between GAAP and IFRS need to be recognized and eliminated.

There are several main differences between GAAP and IFRS, which are causing substantial delays in their convergence. Some major distinctions between these two standards are that the IFRS does not permit LIFO, it uses a single step method for impairment write-downs, it has different rules for curing debt covenants, reports business segments differently, has different consolidating requirements, and is less extensive guidance regarding revenue recognition than GAAP. These variations at a minimum, have to be intensely studied by FASB to conclude extensive impacts on United States companies.

The first major difference between these two set of standards is the handling of inventory. Currently, U.S. GAAP allows the costing methods for inventory of FIFO, average cost, and LIFO. The IFRS has banned LIFO and companies will have major changes in inventory valuation to fit the new standards. Also, no special rules for livestock or crop are specified in GAAP, while IAS 41 specifies the use of fair value less estimated selling costs for biological assets. Another important change in inventory accounting is that IFRS will present inventory at lower of cost or net realizable value rather than market. The IFRS will also require that lower of cost or market adjustments be reversed under defined conditions, while U.S. GAAP does not allow this reversal.

Second, IFRS has different measurement procedures for the impairment of goodwill and other intangible long-lived assets. U.S. GAAP measures goodwill impairment using a two step process that first compares the estimated fair value of the reporting unit with the unit’s book value. If the book value is greater than the fair value, goodwill is impaired and step two needs to be completed. In this next step, the fair value of net identifiable assets are established and subtracted by the reporting unit’s fair value. The excess in the fair value of net identifiable assets is to be considered the goodwill impairment. IFRS will not use this process of measurement and instead will use a single-step computation similar to other long-live assets. This measurement for long-lived assets will be done with reference to higher of value in use or fair value less costs to sell. When this impairment for the long-lived assets (not goodwill) are measured they are allowed to be reversed in certain conditions under the IFRS.

Third, GAAP and IFRS have different rules when dealing with the curing of debt covenant violations. When a debt covenant violation has occurred it must be cured before the end of the year balance sheet date because under international standards it is not permissible after year end. This will have a large impact on the way companies will chose to finance their operations. There will be more pressure for companies to renegotiate their debt or they will have to raise capital through the issuance of their equity. Violations of debt covenants will show clearly which companies are not financially strong and will continue to show future problems.

The last major difference between GAAP and IFRS is that the revenue recognition guidance is less extensive for the IFRS. The IFRS guidance on this topic fits into one book about two inches thick, while the U.S. GAAP has approximately 17,000 pages of rules and guidance. (IASB) One reason for this is that GAAP contains industry-specific instruction, for instance, the revenue made by software development. The IFRS has relatively low regulations on the way specific industries recognize revenue. Some other differences between GAAP and IFRS are differences in segment reporting and consolidations.

Segment reporting differs slightly between the two standards because GAAP is flexible about how the company defines its segments through the management approach. The internal management selects specific segments even if they differ from the financial statements, when following GAAP, because these segments correspond to the internal operations. The IFRS will not allow the management approach, and the segments used must match the financial statements. IFRS No. 8 “Operating Segments” requires the reportable segments to be disclosed in both the annual and interim financial statements, which include both business and geographical segments. Another difference is that it will be required to have two different bases of segmentation, a primary base and a secondary base.

Another distinction between these two standards is that consolidation will be handled differently. First, GAAP requires consolidation for majority owned subsidiaries, while IFRS will look at control as a factor for consolidation. Some other differences are that variable interest entities and qualifying SPEs have not been addressed by the IFRS, parent and subsidiary accounting policies will need to be conformed, and minority interests will be required in equity. When it comes to consolidating foreign subsidiaries there are additional differences to consider. In order to consolidate a foreign subsidy, the parent company needs to receive the foreign financial statements and conform to U.S. GAAP before translation of the foreign currency. This step will be eliminated and will make this type of consolidation easier. More emphasis, however, will be placed on the currency of the economy of which business actually occurs to determine the functional currency, while GAAP is open to judgment with high consideration of cash flows. And last, under GAAP the equity accounts are translated at historical value, but are not specified under IFRS.

There are many differences between the U.S. generally accepted accounting principals and the international financial reporting standards, including but not limited to topics such as, inventory, impairment measurements, the handling of debt, revenue recognition, segment reporting, and the consolidation of financial statements. With the determination for one set of reporting standards elimination of these dissimilarities will be evident through the ongoing efforts between the FASB and the IASB. The most important thing is that accountants in the United States need to be ready for this inevitable event, because after all, the world is flat.

Does Your Personality Affect the Way You Save for Retirement?

If your per­son­al­ity is priority-oriented, you prob­a­bly have a map for your future drafted that includes retire­ment sav­ings. On the other hand, if your per­son­al­ity is free-floating and flex­i­ble, you may have ignored retire­ment advice to plan for a reli­able finan­cial future in favor of imme­di­ate grat­i­fi­ca­tion in the form of travel, pur­chases of big ticket items and other things that have absorbed your past income. If you’re sud­denly aware that retire­ment is loom­ing and is fast approach­ing, don’t panic; there is still time to get a sav­ings plan in place.

Retire­ment finance is a tricky game, but one you must win for peace of mind. Think about where you would like to live when you retire, and what you want out of your life in your golden years to be like. Start now with retire­ment advice from a licensed finan­cial plan­ner, even if it means you must delay cur­rent plans for adven­ture, travel and shop­ping. Here are some steps to fol­low on that path to victory:

1. Find an excel­lent finan­cial advi­sor to help you with your retire­ment finances. Ask friends, con­tact the local Bet­ter Busi­ness Bureau and other reli­able resources for names. Go in for an ini­tial con­sul­ta­tion to see if this per­son is some­one you can work with and trust. Check references.

2. Look at alter­na­tive plans. For exam­ple, you can look up cost of liv­ing sta­tis­tics for dif­fer­ent geo­graphic areas in the coun­try. It may be that buy­ing a condo in Florida is less expen­sive than pur­chas­ing a small house in Cal­i­for­nia. There are data­bases, tools and sta­tis­tics on state costs of liv­ing avail­able at the U.S. Bureau of Labor web­site, http://www.bls.gov.

3. Pri­or­i­tize your per­son­al­ity “wants” and “needs” lists. If your fam­ily his­tory indi­cates you may be likely to expe­ri­ence major med­ical prob­lems in the future, you may want to look at areas to live in that have major med­ical ser­vices and care avail­able. If you have spe­cial sports inter­ests, like water sports or ski­ing, you may wish to look closely at what sports will be avail­able to you in a par­tic­u­lar geo­graphic area.

4. Con­sider your fam­ily. Are you going to want to live close to your grand­chil­dren? If you live in a cold cli­mate you may decide to get a condo or a time share in a warmer cli­mate so that you can stay close to family.

5. Start sav­ings accounts now. Even a sim­ple sav­ings account is bet­ter than none. For invest­ments, con­sider the time you have left prior to expected retire­ment. If the time is close to get your retire­ment finances in order, most finan­cial advi­sors would rec­om­mend keep­ing cash in lower risk instru­ments. If you have more time, high risk invest­ments may pay off.

No mat­ter what age you are, it’s time to con­sult a bona fide retire­ment finance pro­fes­sional and get the retire­ment advice you need. Your dreams can become real­ity, but only with reg­u­lar sav­ings and a solid plan. For more retirement advice and tips go to

Introduction to Reverse 1031 Exchanges Pursuant to IRS Revneue Procedure 2000-37

Investors can acquire a like-kind replacement property before disposing of the current relinquished property by structuring a reverse 1031 exchange transaction pursuant to Revenue Procedure 2000-37.

Investors may be concerned about the possibility of not being able to locate, identify and acquire suitable like-kind replacement properties within the required deadlines of a forward (regular) tax-deferred like-kind exchange transaction.

A reverse 1031 exchange provides the Investor with the flexibility to spend as much time as needed to locate a suitable like-kind replacement property, without the pressure of the forward 1031 exchange deadlines.

Reverse 1031 Exchanges Are Complicated Income Tax Transactions –
Investors Should Always Review with Legal, Tax and Financial Advisors

1031 exchange transactions, especially those structured as reverse 1031 exchanges, are exceptionally complicated income tax strategies.

The sophisticated Investor will always have a good team of experienced professional advisors, including legal, tax, and financial advisors, along with a knowledgeable broker and professional, experienced, institutional Qualified Intermediary, also referred to in the real estate industry as the 1031 Exchange Accommodator and an Exchange Accommodation Titleholder, with significant technical experience in 1031 exchange transactions.

Investors should always seek competent legal, financial and tax counsel before entering into any tax 1031 exchange transaction.

Treasury Department Issues Reverse 1031 Exchange Guidance

The Department of the Treasury issued Revenue Procedure 2000-37 on September 15, 2000, which included a number of safe-harbor provisions, or guidelines, for properly structuring reverse 1031 exchange transactions. This Revenue Procedure has significantly increased the number of reverse 1031 exchange transactions being conducted by Investors since 2000.

Prior to 2000, Investors completed reverse 1031 exchanges with little technical and structural guidance from the Internal Revenue Service. While the technical guidance provided by the Treasury Department has clarified the issues surrounding reverse 1031 exchanges and provided a much higher comfort level than before, they also leave a lot of unanswered questions and create a more complex and costly tax 1031 exchange structure.

Parking Property with the Exchange Accommodation Titleholder

In a reverse 1031 exchange, an Exchange Accommodation Titleholder, also referred to as an EAT, acquires and holds or “parks” legal title to either the Investor’s relinquished or replacement property, and the Qualified Intermediary (Accommodator) administers the 1031 exchange portion of the transaction.

Non-Arms Length Contractual Arrangements

Revenue Procedure 2000-37 allows the Exchange Accommodation Titleholder and the Investor to enter into a number of non-arms length contractual arrangements to complete a reverse 1031 exchange transaction. These non-arms length contractual arrangements facilitate the administration of the reverse tax-deferred like-kind exchange and eliminate certain risks for the Exchange Accommodation Titleholder and the Investor.

The Investor is responsible for any losses and will receive any profits generated from the property during the time the property is held or parked by the Exchange Accommodation Titleholder.

The property will be leased from the Exchange Accommodation Titleholder by the Investor via a triple-net lease. Once leased to the Investor, the Investor will assume management responsibilities of the property, or may retain a third-party property management company while the property is parked by the Exchange Accommodation Titleholder.

Deadlines for Identifying the Relinquished Property and Transferring Parked Property

Deadlines for identifying the relinquished property to be disposed of and transferring or conveying title of the parked property by the Exchange Accommodation Titleholder are the same as those for a forward 1031 exchange transaction.

Investors have 45 calendar days after the transfer (conveyance of title) of the parked replacement property to the Exchange Accommodation Titleholder to formally identify the property they intend to relinquish or dispose of as part of reverse 1031 exchange transaction.

In either case, the relinquished property must be sold and transferred (conveyed) to the buyer within 180 calendar days after the parked property was transferred (conveyed) to the Exchange Accommodation Titleholder.

Reverse 1031 Exchange Structures

Investors must decide whether to park the replacement property or relinquished property with the Exchange Accommodation Titleholder. It will typically depend on whether the lender will allow the Exchange Accommodation Titleholder to acquire and park title to the replacement property when the lender is also using the same property as collateral for the financing.

There are other factors that may play a role in determining which property will be parked by the Exchange Accommodation Titleholder as well, including:

Operational Considerations. Does parking title to either property create any problems with the ongoing operation of the property? Will a change in legal ownership affect any vendor or tenant relationships?

Risk Management Considerations. Are there any specific risks to the Exchange Accommodation Titleholder that may prohibit the EAT from accepting and parking title? Have there been any hazardous or toxic substances used or stored on the property? Do the ongoing operations of the property put the EAT at risk?

Insurance Coverage Considerations. When property is parked with the Exchange Accommodation Titleholder it is usually held by the EAT in a single-member limited liability company and this may pose problems when attempting to obtain insurance coverage for the EAT during the reverse 1031 exchange transaction, especially if there will be construction during the course of completing the transaction.

Financing Considerations. Properties transferred or conveyed to the Exchange Accommodation Titleholder that have existing financing may risk triggering due on sale clauses with the current lender.

Liquidity Concerns. In order to defer 100% of the applicable depreciation recapture and capital gain income tax liabilities, Investors must meet three requirements when structuring 1031 exchanges: (1) exchange or trade equal or up in value; and (2) reinvest 100% of the Investors equity (net cash proceeds from sale of relinquished property); and (3) replace any debt with new debt on the replacement property. The Investor’s equity is trapped in the relinquished property because it is not sold until after the replacement property is acquired which may create liquidity or financing challenges for the Investor when structuring a reverse 1031 exchange transaction.

Structuring the reverse 1031 exchange transaction with the Exchange Accommodation Titleholder acquiring and parking title to the replacement property will usually be the most beneficial structure from an Investor’s perspective.

However, given the considerations outlined above, there are often situations when acquiring and parking title to the replacement property in the name of the Exchange Accommodation Titleholder is not a practical structure. In these cases, title to the relinquished property must therefore be transferred (conveyed) to and parked with the Exchange Accommodation Titleholder.

These two reverse 1031 exchange structures are frequently referred to as the Exchange Last Structure (parking title to the replacement property) and the Exchange First Structure (parking title to the relinquished property).

The best way to analyze and understand a reverse 1031 exchange transaction is to view it as two separate transactional parts – each separate from the other and yet both contractually integrated to form the reverse tax-deferred like-kind exchange transaction.

Parking Property and a Simultaneous 1031 Exchange

Contrary to popular opinion Revenue Procedure 2000-37 is not a reverse 1031 exchange Revenue Procedure. It really provides safe-harbor guidelines for structuring reverse 1031 exchange transactions by utilizing a “parking” structure or strategy. It is commonly called a reverse 1031 exchange because it allows the Investor to acquire his like-kind replacement property first and then dispose of his relinquished property at a later date.

The term reverse 1031 exchange is therefore really a misnomer because it actually consists of: (1) a parking transaction where either the replacement property or the relinquished property is acquired and held or parked by the Exchange Accommodation Titleholder; and (2) a simultaneous 1031 exchange (not a true reverse tax-deferred like-kind exchange) occurs either at the beginning (Exchange First Structure) or at the end (Exchange Last Structure) of the reverse 1031 exchange transaction.

Exchange Last Parking Structure — Parking Title to the Replacement Property

The preferred reverse 1031 exchange strategy is the Exchange Last Structure where the Exchange Accommodation Titleholder acquires and parks title to the replacement property.

This structure provides the Investor with a great deal more flexibility in planning the acquisition and financing of the like-kind replacement property because the actual 1031 exchange has not yet occurred. We do not care at this point if the Investor has exchanged or traded equal or up in value, has reinvested his equity (cash) or has replaced any necessary debt on the like-kind replacement property because the only thing that has been completed so far is the acquisition and parking of the like-kind replacement property by the Exchange Accommodation Titleholder.

These 1031 exchange requirements are easily addressed at the back end of the transaction when the simultaneous 1031 exchange occurs.

Acquiring and “Parking” the Like-Kind Replacement Property

Investors enter into a legal agreement called the Qualified Exchange Accommodation Agreement (“QEAA”) with an Exchange Accommodation Titleholder (“EAT”).

The Exchange Accommodation Titleholder establishes a new single-member limited liability company (“LLC”) for each reverse 1031 exchange transaction for the sole purpose of holding or “parking” title to the like-kind replacement property.

It is important for the Investor to select and get the Exchange Accommodation Titleholder involved before the transaction closes. Once the Qualified Exchange Accommodation Agreement has been signed the Investor will assign the Purchase and Sale Agreement and any related escrow instructions or other transactional documents (if any) for the like-kind replacement property to the Special Purpose Entity in preparation for closing the transaction.

The Investor will either loan and/or arrange for third-party financing for the acquisition of the like-kind replacement property to the Special Purpose Entity. At the close of the like-kind replacement property transaction, the Exchange Accommodation Titleholder will receive and “park” title to the like-kind replacement property.

Interim Activity While Property is Parked with EAT

The “parked” like-kind replacement property is typically leased by the Exchange Accommodation Titleholder to the Investor using a triple net lease while the replacement property is held or “parked” by the EAT.

The ability to lease the “parked” like-kind replacement property to the Investor during this time gives the Investor the ability to operate the property, including the ability to lease the property, collect the rents and income, and pay the expenses. The Investor is not permitted to depreciate the property while it is “parked” by the Exchange Accommodation Titleholder since they do not technically own it yet.

Any lease payments made by the Investor to the EAT are offset by any debt payments owed and made by the EAT to the lender or financing company. The lease payments may cover any debt service owed on outside financing.

The Investor must identify his relinquished property within 45 calendar days after the close of the replacement property transaction, and legal title to the replacement property has been transferred or “parked” with the Exchange Accommodation Titleholder.

The Investor will then assign the Purchase and Sale Agreement and any related escrow instructions or other transactional documents (if any) for the disposition of the relinquished property to the Qualified Intermediary. The exchange funds at the close of the relinquished property transaction will be sent to the Qualified Intermediary.

Acquisition of the Replacement Property from the EAT

The Qualified Intermediary will use these 1031 exchange funds to acquire the “parked” like-kind replacement property from the Exchange Accommodation Titleholder.

The Qualified Intermediary acquires the “parked” like-kind replacement property by executing a Purchase and Sale Agreement. The Investor will receive their “parked” replacement property or 100% of the membership interests or ownership in the Special Purpose Entity that holds legal title to the “parked” replacement property from the Exchange Accommodation Titleholder by completing a simultaneous exchange. The Exchange Accommodation Titleholder uses the net proceeds received from the sale of the relinquished property to pay down the loan to the third-party lender and/or the Investor.

The Investor should obtain their lender’s approval prior to entering into an “Exchange Last” reverse tax-deferred like-kind exchange transaction if he needs to secure institutional financing. The SPE/LLC will be the borrower on the loan since the SPE/LLC holds title to the property. The Exchange Accommodation Titleholder will typically sign the loan documents on a non-recourse basis and the Investor can guarantee the loan documents on a recourse basis.

Make sure that your lender understands that you are contemplating a reverse 1031 exchange transaction and not a regular forward 1031 exchange. I have seen lenders say yes all too often only to say no just a few days before the closing when they find out that the Exchange Accommodation Titleholder will be holding title to the like-kind replacement property.

When to Use the Exchange Last Parking Structure

Investors typically select the “Exchange Last” structure for a reverse 1031 exchange transaction when they are purchasing the like-kind replacement property for all cash or the seller is providing short-term financing (seller-carry back financing).

The following table will help you walk through the steps of an “Exchange Last” structure.

Exchange Last Parking Structure — Parking Title to the Replacement Property

Investor enters into a Qualified Exchange Accommodation Agreement with the Exchange Accommodation Titleholder.
Exchange Accommodation Titleholder forms limited liability company (LLC) entity to acquire title to property.
Investor assigns its rights under Purchase Contract for like-kind replacement property to Exchange Accommodation Titleholder and provides written notification to all parties involved in the transaction.
Investor advances money from itself and/or obtains third-party financing for the limited liability company (LLC) to fund the purchase of the like-kind replacement property. The loan is non-recourse to the LLC and its member but can be guaranteed by the Investor on a recourse basis.
Exchange Accommodation Titleholder acquires title to like-kind replacement property directly from seller and gives Investor and/or other lender a note(s) that is secured by a deed of trust or mortgage on the replacement property.
Under the QEAA, Investor leases replacement property from Exchange Accommodation Titleholder under a triple-net lease. Investor’s monthly rent (if any) may cover any debt service owed on outside financing.
Investor identifies relinquished property within 45 calendar days after the closing and parking of the like-kind replacement property.
Investor executes Sales Contract with buyer to sell relinquished property.
Investor executes Tax-Deferred Exchange Agreement with Qualified Intermediary.
Investor assigns its rights under the Sales Contract to Qualified Intermediary and gives written notice to buyer.
Relinquished property closes with Investor direct deeding property to purchaser and closer disbursing all exchange proceeds from relinquished property to Qualified Intermediary.
Investor and Exchange Accommodation Titleholder execute Purchase and Sales Contract for like-kind replacement property.
Investor assigns rights under Purchase and Sales Contract for like-kind replacement property to Qualified Intermediary.
At closing, Qualified Intermediary pays off Investor and/or lender in satisfaction of note(s) given by Exchange Accommodation Titleholder to Investor and/or lender. Closing must be simultaneous with the relinquished property closing.
Qualified Intermediary instructs Exchange Accommodation Titleholder to either transfer title to like-kind replacement property directly to Investor or to transfer 100% of the membership interest in Exchange Accommodation Titleholder to Investor, completing a simultaneous exchange.

Exchange Accommodation Titleholder will usually not hold title of the like-kind replacement property for more than 180 calendar days.

Exchange First Parking Structure — Parking Title to Relinquished Property

In an Exchange First parking structure the relinquished property is acquired, held or parked by the Exchange Accommodation Titleholder and a simultaneous or concurrent 1031 exchange transaction is completed by selling (transferring or conveying) the relinquished property to the Exchange Accommodation Titleholder and simultaneously acquiring and closing on the like-kind replacement property.

The relinquished property may not be transferred to a disqualified entity such as a related party of the Investor or to an agent of the Investor. When you find a buyer for the parked relinquished property, the Exchange Accommodation Titleholder deed title of the relinquished property directly to the buyer at the close of the transaction and forwards any net sales proceeds to the Investor in repayment of the funds advanced to complete the reverse tax-deferred like-kind exchange.

In the “Exchange First” parking structure, the Investor will assign a Purchase and Sale Agreement for the relinquished property to the Qualified Intermediary. The Investor will enter into a Qualified Exchange Accommodation Agreement (“QEAA”) with the Exchange Accommodation Titleholder. The Exchange Accommodation Titleholder sets up a single-member limited liability company (LLC) to acquire, hold or park title to the relinquished property.

The Investor will sell the relinquished property to the Exchange Accommodation Titleholder in order to complete the simultaneous 1031 exchange transaction. The Investor and/or his lender will loan funds to the Exchange Accommodation Titleholder, and the Exchange Accommodation Titleholder will execute a note and deed of trust or mortgage in favor of the lender.

The Exchange Accommodation Titleholder uses this financing to acquire, hold or park title to the relinquished property from the Qualified Intermediary. The Qualified Intermediary uses these advanced funds received from the Exchange Accommodation Titleholder to purchase the like-kind replacement property on your behalf. The like-kind replacement property is conveyed directly to the Investor simultaneously with the conveyance of the relinquished property to the Exchange Accommodation Titleholder and the simultaneous 1031 exchange is completed.

Once a buyer for the relinquished property is found, the proceeds from the sale of the relinquished property are used to satisfy any financing obtained to complete this reverse tax-deferred like-kind exchange.

When to Use Exchange First Parking

An “Exchange First” parking structure may be a more viable option than an “Exchange Last” when you need to obtain conventional institutional financing on the like-kind replacement property.

Lenders may have difficulty lending on property that is held by a third-party such as an Exchange Accommodation Titleholder on behalf of the Investor.

Exchange First Parking Structure — Parking Title to the Relinquished Property

Investor selects relinquished property from his portfolio.
Investor executes a Qualified Exchange Accommodation Agreement (QEAA) with Exchange Accommodation Titleholder.
Exchange Accommodation Titleholder forms an limited liability company (LLC) or other special purpose entity to park title to relinquished property.
Exchange Accommodation Titleholder and Investor execute Purchase and Sale Agreement for the sale of the relinquished property to the Exchange Accommodation Titleholder.
Investor advances funds to or arranges for third-party financing for the Exchange Accommodation Titleholder to “purchase” the Investor’ relinquished property.
Investor executes Tax Deferred Like-Kind Exchange Agreement with Qualified Intermediary (Exeter 1031 Exchange Services, LLC).
Investor assigns Purchase and Sale Agreement for relinquished property to Qualified Intermediary and notifies purchaser (Exchange Accommodation Titleholder).
Exchange Accommodation Titleholder disburses funds advanced or loaned to it directly to the Qualified Intermediary; and the Qualified Intermediary instructs Investor to convey relinquished property to Exchange Accommodation Titleholder.
Investor enters into a Purchase and Sale Agreement for their like-kind replacement property.
Investor assigns Purchase and Sale Agreement for like-kind replacement property to Qualified Intermediary and the Seller of the like-kind replacement property.
Qualified Intermediary disburses loan funds provided by Exchange Accommodation Titleholder to seller of the like-kind replacement property and directs seller to deed the like-kind replacement property directly to the Investor. Exchange is now completed.
Exchange Accommodation Titleholder leases the relinquished property to the Investor under a triple-net lease.
Investor enters into Purchase and Sales Agreement with buyer for Investor’s relinquished property that is now being held by the Exchange Accommodation Titleholder.
Investor assigns Purchase and Sales Agreement to Exchange Accommodation Titleholder and notifies buyer of the assignment.
Exchange Accommodation Titleholder closes on relinquished property sale and uses sales proceeds from relinquished property to satisfy a note(s) given to Investor and/or other lender.