Two-Party Simultaneous Exchanges

1031 Exchange Services

A two-party simultaneous exchange is the most straightforward type of 1031 exchange transaction and involves two parties swapping like-kind properties and deeds. Although relatively basic, two-party simultaneous exchanges have certain disadvantages. It can be difficult to find another party who wants to do a direct swap for your property at exactly the same time you want to acquire their property.

Additional cash given to make up for a difference in value is considered non-like-kind property and therefore taxable to the receiving party. The receipt of property that is not like-kind, such as added taxable cash, is referred to as “boot.” Another challenge with two-party simultaneous exchanges is matching the equity and debt on both properties to order to avoid one party recognizing some form of boot.

It is essential that a two-party simultaneous transaction be closed as an exchange, as opposed to two sales and two purchases. A successful simultaneous 1031 exchange requires that the closing of the relinquished property and the replacement property occur on the same day, with no interval of time between the two closings.

An advantage to two-party simultaneous exchanges is that there is no need for a qualified intermediary (QI). However, it is always advisable to consult with experienced legal and tax professionals before engaging in any type of 1031 transaction.