NYDEC - New York Deferred Exchange Corporation
NYDEC - New York Deferred Exchange Corporation
Lower Manhattan
Products

NYDEC acts as Qualified Intermediary for each of the following exchange types:

FORWARD EXCHANGES

The most typical type of real estate property exchange is called a Forward Exchange. When a real property owner (“Exchanger”) sells this “Relinquished Property” to a third party buyer, the latent capital gains tax is deferred if the proceeds from the sale are used to purchase replacement property, also referred to as “Acquired Property”. To be eligible both the Relinquished and Acquired Properties must be “held either for productive use in a trade or business or for investment”.

The Basics

Step 1: Arrive at an agreement to sell property to another party.

Step 2: Contact NYDEC in order to prepare the necessary documentation prior to the sale.

Step 3: At the time of the Relinquished Property closing (“RP Closing Date”), all net sale proceeds must be made payable to a newly established segregated exchange account and not the Exchanger.

Step 4: Within 45 days following the RP Closing Date, the Exchanger must identify in writing, potential real estate properties for acquisition.

Step 5: Negotiate the purchase of Acquired Property(ies) from third party seller(s), requesting funds held in the Exchange Account for down payment(s) held by seller’s attorney.

Step 6: Within 180 days following the RP Closing Date or the Exchanger’s tax filing due date, including extensions (whichever is sooner), the Exchanger must finalize the acquisition of any or all of the properties identified in Step 4 above. In order to avoid any capital gains tax from the sale of the Relinquished Property, the Acquired Property must be of equal or greater value (reduced by reasonable and customary closing costs). In addition, the Exchanger cannot end up with net cash at the conclusion of the exchange.

REVERSE EXCHANGES

The Reverse Exchange process is used when it is either impractical or impossible for the Exchanger to sell Relinquished Property prior to purchasing Acquired Property. The Reverse Exchange process resembles a Forward Exchange in many respects, however a more complex procedure must be followed to abide by Federal Statutes.

The Basics

Step 1: Arrive at an agreement to purchase property (Acquired Property) from another party.

Step 2: Contact NYDEC in order to prepare the necessary documentation prior to the purchase.

Step 3: Create a single member Limited Liability Company (LLC), whereby NYDEC will be the initial member, during the “Parking Phase” of the exchange.

Step 4: At the time of the Acquired Property closing (“AP Closing Date”), the LLC act as purchaser using funds provided by, or secured by, the Exchanger.

Step 5: Within 45 days following the AP Closing Date, the Exchanger must identify in writing, the Relinquished Property that will be sold to complete the exchange.

Step 6: Once negotiated, forward a copy of the Contract of Sale to NYDEC.

Step 7: Within 180 days following the AP Closing Date or the Exchanger’s tax filing due date, including extensions (whichever is sooner), the Exchanger must finalize the sale of the Relinquished Property at which time the LLC membership will be transferred from NYDEC to the Exchanger through a Simultaneous Exchange process.

CONSTRUCTION EXCHANGES

Exchangers are permitted to purchase and improve Acquired Property within the context of a property exchange utilizing the single membership LLC structure outlined in the Reverse Exchange description. A Construction Exchange can be accomplished in either a Forward or Reverse Exchange context.

The Basics

Step 1: Arrive at an agreement to either sell Relinquished Property or buy Acquired Property.

Step 2: Contact NYDEC in order to prepare the necessary documentation before closing.

Step 3: Create a single member Limited Liability Company (LLC), whereby NYDEC will be the initial member, during the “Parking Phase” of the exchange.

Step 4: At the time of the first closing, both the 45-day Identification Period and 180-day Exchange Period start.

Step 5: The Acquired Property is purchased in the name of the LLC.

Step 6: Construction is managed by the Exchanger, including the authorization of all construction progress payments to third party contractors.

Step 7: All construction necessary to accomplish the expenditure goals for the exchange must occur within the Exchange Period.

Step 8: At the conclusion of the exchange the LLC membership is transferred from NYDEC to the Exchanger to complete the exchange process.





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