This Case has been utilized by Clients who are in active businesses, and wish to remain in their old facility until a new one has been created and is ready for occupancy. Typically, they wish to move in over a weekend, and then close on the sale of the old property.

One Client to utilize this Case was a cleaning company. A buyer wanted the old facility as a tear-down, and the Client wanted the proceeds handled as a Section 1031 Exchange. The Client had a site picked out, which needed a brand new, state of the art, cleaning facility erected on the vacant lot.

A corporation (Special Purpose Entity (SPE), a/k/a Exchange Accommodation Titleholder (EAT)) was formed to own the land and construct the building, using the proceeds of a line of credit secured on the old facility and the new lot. All construction payments were made by the SPE after the Client had specifically approved each application. Construction took about one year. When complete, the Client moved into the new facility on a short lease from the SPE, and completely vacated the old plant.

Immediately, a closing on the old site was held, and the purchase funds were delivered to Edmund & Wheeler, Inc., who in turn directed the SPE to deed the new plant to the Client, and in so doing, pay down as much of the line of credit as there were funds available.

The net effect of the transaction is to take the purchaser’s funds from the sale of the Relinquished Property and, via the mechanism of a Qualified Intermediary, use these funds to pay the construction debts of an SPE formed to construct brand new Replacement Property. The Client gets a new facility and full tax deferral.