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SIMULTANEOUS
EXCHANGES
Prior to the late 1970s, all
exchanges were simultaneous exchanges by necessity.
Today, very few exchanges are simultaneous. These
exchanges are discouraged by the IRS. There are no
safe harbor rules. Consequently, the risk of IRS
challenge is higher.
We discourage our clients
from attempting a simultaneous exchange, suggesting
instead that each exchange party
enter into separate delayed exchange agreements
with an intermediary. There are several reasons
for this:
Disadvantages Of Simultaneous Exchanges.
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Two intermediary
assisted exchanges will almost always be less
expensive than attempting a simultaneous exchange.
Because of the safe harbor rules, there are
guidelines for qualifying a delayed exchange for
favorable tax treatment. With a simultaneous,
each transaction must be reviewed by legal and tax
advisors.
-
With an intermediary
assisted delayed exchange, the risk of IRS challenge
is substantially reduced.
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All closings in a
simultaneous exchange must occur on the same day,
often with two or more title companies and lenders
involved. Coordination is essential,
difficult, and can be ulcer producing.
-
Direct deeding is not
permitted as it is under the safe harbor rules for
delayed exchanges. Therefore, sequential
deeding is required. This may cause title to
property to pass through multiple parties before
being vested in the final owner. Environmental
risks can be substantial and can result in liability
even if title was held for only a brief moment
during an exchange.
Advantages Of Simultaneous Exchanges.
None that we are aware of.
This decision is a no-brainer.` |
