What is a 1031 Exchange?

The Internal Revenue Code provides that a taxpayer may sell real property and defer payment of capital gains tax, if that taxpayer uses the proceeds to acquire a like-kind replacement property.

Our mission is simple: To provide our clients the best IRC §1031 exchange consulting, expert service and unparalleled financial security.

Your first and last concern in a 1031 exchange transaction should be security and integrity. Are your funds secure and will your transaction be processed accurately are the two most important questions you should pose to the Qualified Intermediary (“QI”) handling your exchange transaction. Unfortunately, there are no federal regulations for the QI industry. And, because it is fairly easy to become a QI, it is imperative that you place your exchange funds with a QI that will protect your assets.

Why Exchange?

• Capital gains tax is significant;
• Reinvestment into replacement property allows taxpayer to leverage dollars that would
  otherwise be spent on taxes;
• Allows for non-income producing property to be replaced with income-producing
  property; and
• Allows taxpayer to diversify portfolio and minimize risk.

What We Do

• Act as Qualified Intermediary (QI), as required by the Treasury Regulations; • Prepare all documents required for the exchange;
• Consult with your tax advisor;
• Execute closing documents;
• Hold the exchange proceeds to avoid constructive receipt of funds; and
• Coordinate with the closing agents, real estate professional, and tax and legal advisors.

The Old Republic Advantage – Strength in Numbers

When you choose Old Republic Exchange (ORE), a wholly-owned subsidiary of one of the nation’s premier title insurers, Old Republic Title, you have the confidence of knowing our financial strength preserves the integrity and security of your transaction. Old Republic Exchange is a member of the Old Republic Title Insurance Group, which is a wholly-owned subsidiary of Old Republic International Corporation (NYSE: ORI), a multi-billion dollar corporation, which ranks among the nation’s 50 largest publicly-held insurance organizations. Since 1992, no other title insurer has received higher overall financial ratings than Old Republic Title.

Personal and Professional Service

Our knowledgeable and professional staff of qualified account managers and experienced attorneys understand your individual needs in the IRC §1031 property exchange process and will assist you with each step in that process. When necessary, Old Republic Exchange provides complete and concise exchange documentation within hours.

The Industry Leader

Old Republic Exchange has facilitated thousands of 1031 transactions. We are the unparalleled leader in the exchange business. Our national team consists of qualified, experienced professionals who will assist you in structuring and managing your transaction — be it the simple delayed or simultaneous exchange, or the complicated reverse, build- to-suit or multi-site commercial transaction. Old Republic Exchange is your national 1031 exchange services solution.

3 Requirements to Defer Capital Gains Tax Under Section 1031:

(1) The property disposed of and the property received must be held for productive use in a trade or business or for investment.

Property held primarily for sale does not qualify. An example of this is real property held for sale to customers in the ordinary course of a trade or business, commonly referred to as “dealer property”.

(2) The property disposed of and the property received must be of “like-kind” .

Like-Kind Real Property. Like-kind does not mean that the property sold and the property acquired must share the same physical characteristics. Instead, “like-kind” simply refers to the requirement that property “held for investment or for productive use in a trade or business” must be exchanged for other property that also is “held for investment or for productive use in a trade or business”. In other words, an apartment building need not be exchanged for another apartment building. It can be exchanged for raw land, a farm, a duplex, retail property, industrial property, a perpetual conservation easement, a leasehold of 30 years or more, etc.

(3) There must be an “exchange” as distinguished from a “purchase and sale”.

A sale of property and a reinvestment of the proceeds into another property will not qualify as an exchange under section 1031. The essence of a sale is the receipt of cash for property; whereas the essence of an exchange is the transfer of property between owners, where each party to the exchange gives up a property interest in return for a new or additional property interest.

There are four methods of exchanging: simultaneous exchange, delayed exchange, reverse exchange and construction/improvement exchange (see pages 5-8 for methods of exchanging).