State-of-the-Art Processes
Although IRS Rev. Proc. 2000-37 provides the necessary guidance on the structure of safe harbor reverse exchanges, there is nothing formal that describes the various and detailed aspects of the execution of reverse exchanges. Ultimately, there is no authority on correct reverse exchange execution. Potential Exchangers will be surprised by the resulting lack of consistency in reverse exchange execution. Many Accommodators use outdated reverse exchange documents that do not reflect current best practices, IRS guidance and the results of various forms of litigation and court action. Many accommodators, especially those charging fees on the low end of the range, cut every possible corner to avoid cost and reduce the time expended. This will likely come back to haunt the Exchanger as many elements of the process can affect the Exchanger after the conclusion of the exchange. Other Accommodators charge very high fees because they really do not want to perform reverses but will do them, at unreasonable expense to the Exchanger, if enough “arm twisting” is applied. This results in spending money needlessly for services provided by a reluctant Accommodator. Frequently, this results in the Accommodator looking at the Exchanger as an adversary and the Accommodator will force the Exchanger to spend an inordinate amount of time collecting information that serves only to reduce their risk of being sued by the Exchangor.
We have invested heavily in reverse exchange processes that are carefully structured to bring value to clients. We ensure complete and timely exchange execution while masking unnecessary complexity. We believe, based on the criteria listed below, that our processes are superior to any others.
The criteria that constitute this standard are as follows:
- Continual independent review
Our exchange processes are regularly subjected to reviews by an independent 1031 exchange authority of the highest caliber. This review process results not only in full compliance with IRS regulations but also includes he dynamic body of new guidance coming from the IRS, the courts and other and other important authorities. - A formal proposal with a fixed fee
We provide each prospective Exchanger a detailed written proposal that describes the form of the exchange, the specifics of the Exchanger’s facts and circumstances, a detailed description of the exact strategy we propose, a description of the documents, roles and responsibilities and a detailed account of all the costs associated with the exchange. We never add additional accommodation fees to an exchange once the formal proposal has been accepted.
- A comprehensive Standard of Care that ensures thoroughness
For each exchange, consistent execution of a detailed process for collecting data, determining strategy, creating documents, forming LLCs, managing deadlines, transferring ownership, communicating results, etc. is critical to ensure that the desired result (deferral of tax) is achieved and that, in the unlikely event of an audit by the IRS, the chances of a successful challenge are minimized. Please contact us for a more detailed description of our Standard of Care.
- A Service Level Commitment that specifies and ensures responsiveness
At each step, the Accommodator should respond aggressively and completely. At critical junctures, responsiveness should be measured in minutes and hours. Please contact us for a detailed description of the Service Level Commitment
- Execution Assurance
At various steps in the process, steps can be taken to ensure the execution of the process. This can mean, for example, recording the Exchanger’s “call option” and pre-executing completion documents which are then placed in escrow with the appropriate instructions in case one of the parties is unavailable for any reason.