CES Exchange Structures & Strategies

Question 1

In a delayed (Starker) exchange, what is the correct order of events?

Accepted Answer

Sell relinquished property first, then identify and acquire replacement property within deadlines

Answer

In a delayed exchange, the taxpayer sells the relinquished property first, then identifies and acquires the replacement property within the 45/180-day deadlines.

Question 2

What distinguishes a 'reverse exchange' from a standard delayed 1031 exchange?

Accepted Answer

In a reverse exchange, the taxpayer acquires the replacement property before selling the relinquished property

Answer

A reverse exchange allows the taxpayer to acquire the replacement property first and then sell the relinquished property, with an EAT parking one of the properties.

Question 3

What is an 'improvement exchange' (also called a build-to-suit or construction exchange)?

Accepted Answer

An exchange where the replacement property is improved using exchange funds held by the EAT before being transferred to the taxpayer

Answer

In an improvement exchange, the EAT holds the replacement property while improvements are made using exchange proceeds, then transfers the improved property to the taxpayer within 180 days.

Question 4

Which type of exchange involves two parties directly trading properties with each other?

Accepted Answer

Two-party direct exchange

Answer

A two-party direct exchange (also called a swap) involves two taxpayers directly exchanging their properties with each other.

Question 5

What is a 'parking arrangement' in the context of a reverse or improvement exchange?

Accepted Answer

The EAT temporarily holds title to one of the properties to facilitate the exchange

Answer

A parking arrangement refers to the EAT taking temporary title to either the replacement or relinquished property to allow the exchange structure to work.

CES - Certified Exchange Specialist Practice Test

CES - Certified Exchange Specialist Practice Test

CES Exchange Structures & Strategies