Conserving Investment Equity
Federal and state capital gain taxes take a huge bite out of the proceeds resulting from the sale of property that has increased in value or been depreciated for tax purposes. A properly structured Section 1031 exchange transaction as dictated by the Internal Revenue Service can join together the sale of an existing property and the purchase of a new property, resulting in deferment of substantial capital gain taxes.
Depending on the circumstances, if a company or individual sells property and incurs long term state and federal capital gains taxes, that seller's replacement investment may need to appreciate as much as 25% in value-just to attain the present value of the sold property prior to sale. In the instance in which a seller will be subject to short-term capital gains taxes, the replacement investment may need to appreciate as much as 65% to attain the present value of the sold property prior to sale.
The IRS spells out in detail the rules and procedure for converting a sale and purchase type transaction into an exchange. One of the most important requirements is that the individual or company intending to execute an exchange, or the "exchanger", must utilize a "safe harbor" as defined by the IRS to hold proceeds while the exchange is in progress. Generally, this is accomplished by using a "qualified intermediary".
The qualified intermediary should not replace or co-opt any of the services that are traditionally provided by attorneys, accountants, brokers and other advisers. Instead, there should be a clear line between the work of the intermediary and any other traditional professional service provider. At the same time, it is vital that the intermediary be experienced and competent to coordinate and work knowledgeably with all clients and professionals involved in a 1031 Exchange.

Qualified Experience and Expertise
Capserve Exchange is a qualified intermediary that provides a safe harbor for exchange clients. Organized by attorneys with extensive experience in real estate development, investment and management, Capserve is uniquely positioned to structure and execute a smooth and perfectly safe exchange.
In order to maintain "arms length" relationships with exchange clients, Capserve's officers do not offer legal, accounting or brokerage services to its clients, nor do they provide title insurance services. Moreover, Capserve's officers do not solicit or seek to offer services beyond the activities of a qualified intermediary. This is an important distinction from some intermediaries that provide intermediary services plus related professional services including legal, accounting and brokerage services. Our arrangement provides a measure of protection to both the professional and to their client.

Capserve is able to assist clients with other IRS-approved exchanges that relate to tax-free exchanges of both real and personal property. These include:

Delayed Exchanges
1031 Exchanges are most commonly associated with the "Delayed Exchange", whereby an exchanger sells a property through a qualified intermediary and then, purchases another property through the qualified intermediary. The sold property (or properties) is referred to as the "relinquished property" and the acquired property (or properties) is referred to as "replacement property". Essentially, once the relinquished property is sold, the exchanger has 45 days to identify a replacement property and 180 days to close on the acquisition of such property. Additional guidelines dictate the manner in which replacement property must be acquired. For more information on how the guidelines of the IRS may affect a prospective 1031 exchange, please feel free to contact Capserve.

Construction/Build to Suit Exchanges
With a Construction/Build to Suit Exchange, the exchanger is able to apply proceeds from the sale of relinquished property to the improvement, construction or repair of replacement property. Construction or repairs may be made to both raw land or existing improvements to create equal or higher value than the exchange property.

Personal Property Exchanges
Personal property exchanges involve the same processes as real property exchanges, but are used for business or investment personal property. This type of exchange may prove extremely useful for exchanging expensive equipment or machinery and for replacing commercial vehicles (like airplanes or sea vessels) and vehicle fleets.

Reverse Exchanges (Involving An Ixchange Accommodation Titleholder-eat)
In a Reverse Exchange, the acquisition of the replacement property closes before the sale of the relinquished property. Usually, the qualified intermediary takes title to the replacement property and holds the title until the exchanger identifies and arranges a closing of the relinquished property. In a reverse exchange, the qualified intermediary acts as an Exchange Accommodation Titleholder. Upon the closing of the sale of the relinquished property, the replacement property title is conveyed to the exchanger.