How must title to the exchanged property be vested at the beginning and the end of the exchange process?
To qualify as an exchange under IRC Section 1031, title to the Replacement Property must be held in the same manner as title to the Relinquished Property. Therefore, the entity beginning the exchange must be the entity concluding the exchange. The Qualified Intermediary will prepare the exchange documents to reflect the vesting information as shown on the title commitment or preliminary report for the Exchange Party’s Relinquished Property. For example: • Husband relinquishes, then Husband must acquire • Husband and Wife, as Trustees relinquish, then Husband and Wife, as Trustees must acquire • ACME Corporation relinquishes, then ACME Corporation must acquire • Johnson LLC relinquishes, then Johnson LLC must acquire • Les Mis Partnership relinquishes, then Les Mis Partnership must acquire An Exchange Party must anticipate these vesting issues as part of the advanced planning for the exchange. Vesting issues are easier to resolve before loan documents are on the closing table. However,
