Improvement (Build-to-Suit) Exchange
An improvement exchange lets a 1031 exchanger use exchange funds to build on or renovate the replacement property, with construction completed before the 180-day deadline.
What it means
Also called a build-to-suit or construction exchange, this structure lets the taxpayer roll downleg proceeds into improvements on (or new construction at) the replacement property. An EAT holds title while improvements are made with exchange funds; when improvements finish, the EAT transfers the improved property to the taxpayer.
Key constraints: all improvements credited to the exchange must be completed and paid for within the 180-day exchange period, and the property's fair market value at receipt (including improvements) must equal or exceed the taxpayer's basis needs for full deferral. Improvement exchanges are the most complex 1031 structure and require experienced counsel.
Related terms
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