Can I use exchange funds to build improvements on replacement property?
Yes, this is sometimes called a Construction exchange. It is more complex and involves fees. The property is held by a specially formed LLC called an EAT (Exchange Accommodation Taxpayer) which acquires title to the replacement property. The EAT can then perform all the improvements, and you can afterward acquire the replacement property from the EAT under the regulations for exchanges. Please contact MEGA 1031 if you wish to perform a construction exchange.
