Improvement 1031 Exchange

Use 1031 exchange funds to build, renovate, or improve your replacement property before the exchange deadline.

Our Nationwide Improvement 1031 Exchange Services

Full-Service Construction Exchange Coordination

EAT-Held Construction Oversight

Coordinated Construction Disbursements

CPA-Ready Exchange Documentation

Improvement 1031 exchanges combine the mechanics of a reverse exchange with active construction or improvements happening on the replacement property during the 180-day window. The EAT holds title while the work is being done. Universal Pacific 1031 handles the EAT formation, the construction payment disbursements from your exchange funds, the timeline tracking of improvements counted toward like-kind value, and the final title transfer once the work is complete.

Improvement Exchange Built Around Your Construction Plan

Build-to-Suit Exchange Planning

Contractor, Lender, and Title Coordination

180-Day Improvement Timeline Tracking

Every build-to-suit exchange has a different construction profile: ground-up new construction, major renovation of an acquired property, leasehold improvements on commercial space. Universal Pacific 1031 tailors the structure to your specific project. We work with your contractor, lender, and CPA to make sure the funds are released according to the construction schedule and that the improvements completed by day 180 are properly counted toward the like-kind value requirement.

Improvement and Build-to-Suit 1031 Exchange Mechanics

An Improvement 1031 Exchange — also called a Build-to-Suit or Construction 1031 Exchange — lets investors use exchange proceeds to build, renovate, or improve replacement property before the exchange period closes. The Exchange Accommodation Titleholder (EAT) holds title to the replacement property while construction is in progress, then transfers the improved property to you at the end of the 180-day window.

Universal Pacific 1031 coordinates the qualified intermediary process, the EAT structure, the qualified exchange accommodation agreement (QEAA), and the construction disbursements paid against contractor invoices. We track the 45-day identification deadline and the 180-day exchange period and coordinate with your lender, title company, contractor, and CPA so the work counted toward the exchange is completed and documented on time. Learn more about the 1031 exchange timeline for context on how the deadlines apply.

Compliance with Revenue Procedure 2000-37

Improvement exchanges qualify under the same safe harbor as reverse exchanges, Revenue Procedure 2000-37. The EAT must hold title throughout the construction period. Only the value of the property plus improvements completed by day 180 counts toward the exchange. Work completed after day 180 does not count toward the like-kind value, and any shortfall becomes taxable boot. We monitor the construction milestones and coordinate the final title transfer on day 180 to keep the qualifying value as high as possible. Review the tax treatment with your CPA or tax advisor before structuring the exchange.

Funding Construction Through the EAT

Funding construction inside a 1031 exchange requires precise disbursement timing. Your exchange funds are held in a segregated account by the qualified intermediary. As the contractor invoices come in, we release payments through the EAT, which holds title to the replacement property. The structure keeps you from having constructive receipt of the funds during the parking period, which preserves the safe harbor under Revenue Procedure 2000-37.

How It Works

Construction Milestone Tracking

Dedicated Improvement 1031 Coordinator

EAT, Contractor, and Lender Coordination

After your first consultation, we map the construction schedule against the 180-day exchange period. You get a written timeline, payment disbursement schedule, lien-release tracking, and progress reports tied to each construction milestone. At the end of the parking period, the EAT transfers the improved property to you, and your CPA receives the documentation needed for IRS Form 8824.

FAQ

What is an Improvement 1031 Exchange?

An Improvement 1031 Exchange, also called a Build-to-Suit or Construction 1031 Exchange, lets you use exchange proceeds to fund construction or improvements on the replacement property during the 180-day exchange period. The Exchange Accommodation Titleholder (EAT) holds title while the work is being done, then transfers the improved property to you at the end of the exchange.

How does a Build-to-Suit Exchange work?

The EAT acquires the replacement property using your exchange funds. During the 180-day exchange period, construction happens on that property while the EAT holds title. You identify the relinquished property within 45 days and sell it within the same 180 days. The EAT transfers the improved property to you at the end of the window. The value of the property plus improvements completed by day 180 is what counts toward the equal-or-greater-value 1031 requirement.

Can I do an Improvement Exchange on property I already own?

Generally no. The IRS treats improvements made to property you already own as taxable income, not part of the like-kind exchange. The Improvement Exchange structure requires the replacement property to be held by the EAT during the construction period. If the property you want to improve is already in your name, it falls outside the safe harbor in Revenue Procedure 2000-37. Talk with your CPA or tax advisor before assuming the structure can be adapted to property you already control.

How much does an Improvement 1031 Exchange cost?

Improvement Exchanges typically cost $7,000 to $12,000 in qualified intermediary and EAT fees, higher than a forward exchange because of the EAT formation, the construction-period oversight, and the added coordination with lenders and contractors. Construction costs themselves are paid from your exchange funds and are separate from the QI and EAT fees. We provide a fixed quote at engagement.

What is the timeline for an Improvement Exchange?

The exchange must close within 180 days from the day the EAT acquires the replacement property. You have 45 days from that same day to identify the relinquished property. All construction or improvements counted toward the exchange value must be completed and the property transferred to you by day 180. Work completed after day 180 does not count toward the like-kind value, and any shortfall becomes taxable boot.

What happens if construction isn’t finished by the 180-day deadline?

Only the value of the property plus improvements completed by day 180 counts toward the like-kind requirement. If construction runs long and the total value (land plus finished improvements) is less than the relinquished property’s sale price, the shortfall becomes taxable boot. Plan a realistic construction schedule before engaging, and contact Universal Pacific 1031 early so the contractor, lender, and title teams can be aligned to the deadline from day one.

What is the role of the EAT in an Improvement Exchange?

The Exchange Accommodation Titleholder is a single-member LLC, formed by your qualified intermediary, that takes title to the replacement property during the construction period. Universal Pacific 1031 forms and operates the EAT for you. The IRS requires the structure under the safe harbor in Revenue Procedure 2000-37 because a taxpayer can’t both hold title and have improvements counted as part of a 1031 exchange.