The tax code allows five different types of property exchanges. This flexibility offers you, as an investor, the opportunity to structure a deal in the way that best suits your situation.

• The Deferred Exchange is by far the most common form of exchange. When you make a deferred exchange, you first sell your existing (relinquished) property. Then, you purchase your replacement property.

• The Simultaneous Exchange is an exchange in which your relinquished property and your replacement property are transferred on the same day.

• The Reverse Exchange allows you to purchase replacement property before you sell your relinquished property. The reverse exchange is a good strategy for investors who experience some difficulty finding a buyer for their existing (i.e., relinquished) property or who find a property they are eager to buy and must then decide which property in their current portfolio to relinquish.

• The Construction Exchange allows you to use a portion of the proceeds from the sale of your relinquished property to improve or build on your replacement property. This approach works well if your replacement property is less valuable than the property you relinquish. When a construction exchange is structured properly, you can use your improvement costs to equalize the exchange.

• Personal Property Exchange offers you the opportunity to make an exchange of investment property other than real estate. But, the like-kind property rule is interpreted more narrowly for personal property than it is for real estate. As a guide, the IRS provides an objective method of property classification. Under this method, personal property will be considered “like-kind” property if it is exchanged for property that falls within either the same General Business Asset Class or the same Product Class.
  
  Some examples of acceptable personal property exchanges are:
        Cattle for cattle (must be the same sex)
        Corporate air plane for corporate jet
        Computer equipment for computer equipment
        Bakery equipment for bakery equipment, and
        Jewelry for jewelry.