IMPROVEMENT 

In an Improvement Exchange the Qualified Intermediary will acquire a property and either (1) make improvements to it or (2) construct a building on it. It is usually a challenge to make this work within the 180 day time frame required by the regulations, so planning for this exchange must start as early as possible. In order to get the tax deferral, it is not necessary that all improvements be complete at the 180 day mark. Deferral will be achieved so long as your proceeds have been reinvested in bona fide construction.

We’ll form a single member limited liability company to hold the improved property and we’ll be continuously involved so this transaction will be more expensive than a forward exchange. In addition to the normal risks, this type of exchange adds risk from weather, permitting/zoning, contractor scheduling and material availability.