Rescue Failing
1031 Exchange

 

 

Okay, let’s say you have already entered into an agreement with an exchange intermediary for a 1031 exchange, your time is running out to identify replacement property or acquire it, and you have no back-up in place for tax deferral. What do you do now, other than rushing to spend top dollar for something you aren’t really sure you want to buy?

The whole concept of the tax-deferred exchange is that the 1031 qualified intermediary (QI) is treated as the party who receives relinquished property from the exchangor (you) and returns replacement property to you. The QI is treated as being your buyer, even if the QI never goes into title. That being so, and because the QI knows right from the start that you might not be able to find acceptable property in time, the QI should offer you an installment contract from the QI as your buyer, as a back-up in case suitable replacement property isn’t found in time—but few QIs will do this.

So, as the time runs out for you to identify or acquire replacement property, S.Crow Collateral Corp. can—if the QI cooperates—assume the QI's position in its exchange agreement with you, and then can re-structure the deal so that you are paid over time via a collateralized installment contract, instead of in an immediately taxable lump sum.

Plus, as a benefit, the unpaid obligation to you will be secured by a collateral account which is legally pledged to you, and you won't just be one of the general unsecured creditors of the QI.