Pacific Western Bank as your 1031 Exchange Accommodator:
Pacific Western Bank (PWB) is pleased to offer 1031 Exchange Accommodation Services. The Exchange Division is headed by a Certified Exchange Specialist. We are a member of the Federation of Exchange Accommodators.

	Competitive Rates – No fee if funds held by PWB exceed $500,000.00. Otherwise, our fee is $500.00.
	Funds held in separate money market accounts (no co-mingling of funds).
	Security of funds – PWB is a state chartered bank, owned by a publicly traded entity (FCBP) with $5.1 billion in assets as of September 30, 2007.
	Personalized attention – we are not a high volume accommodator. Each Exchange is handled on a one-on-one basis.
	Interest paid to Exchangor at bank’s standard money market rate.
	Reliable service.

Please feel free to contact us by phone (877-343-1031) or email with questions or to set up an Exchange. We look forward to accommodating your exchange!

CONCEPT:
A 1031 Exchange enables a taxpayer to defer paying capital gains tax on the sale of investment property. It is tax deferred, not tax-free. Consult your tax advisor.

BASIC VOCABULARY:
Accommodator – Qualified Intermediary; Facilitator; Pacific Western Bank
Basis – Method of measuring investment in property for tax purposes
Boot – Non-qualified property received by Exchangor in exchange (taxable) (e.g. cash, notes, etc.)
Constructive Receipt – Control of the cash without actual physical possession
Direct Deeding – the deeding of the property directly from seller to buyer, rather than indirectly, through the accommodator
Exchangor – Seller/Buyer of qualifying property who wishes to defer taxes on gain
Like - Kind – Qualifying property in an exchange (e.g. real estate)
Qualified Intermediary - An independent middleman that facilitates the exchange process by selling the relinquished property and acquiring the replacement property on behalf of the Exchangor; accommodator; facilitator; Pacific Western Bank
Qualifying Property – Like-Kind property; property held for productive use in a trade or business, or for investment
Relinquished Property – Property being sold by Exchangor; Downleg
Replacement Property – Property being purchased by Exchangor; Upleg
Safe Harbor - A device approved by the IRS which shields the exchangor from receiving sale proceeds in order to comply with 1031 Exchange guidelines; a qualified intermediary is the most commonly used safe harbor

BASIC RULES OF EXCHANGES:

	Must show intent to exchange, in writing, prior to the close of the Relinquished Property.
	Relinquished Property and Replacement Property must be qualifying properties. - No primary residences or vacation/2nd homes
	To defer all of your capital gains taxes: - Purchase price of Replacement Property must be equal to or greater than the sales price of the Relinquished Property (equity and debt) - All proceeds from Relinquished Property must be used in purchase of Replacement Property
	Timing rules must be met
	Exchangor cannot touch the funds (proceeds) from the sale - Accommodator (PWB) holds funds on behalf of Exchangor

	Prior to the close of the Relinquished Property, Exchangor must demonstrate intent to perform an exchange through a written agreement with an Accommodator
	Within 45 Days after the closing of the Relinquished Property, Replacement Property(ies) must be identified, in writing, to a 3rd party (Accommodator)
	Within 180 Days after the closing of the Relinquished Property, Replacement Property(ies) must be acquired (closed)

ANSWERS TO FREQUENTLY ASKED QUESTIONS:
Q: “You mention that a 1031 Exchange defers capital gain tax. What does this mean?”
A: In a 1031 Exchange, the tax basis on your Relinquished Property is carried over to the replacement property. When you finally sell the replacement property, without doing an exchange, you will pay the tax at that time. However, you may repeat this deferral process from property to property over a period of years. Consult your tax advisor.

Q: I know that qualifying property must be “held for investment.” What does that mean?
A: A property that you move into as your residence generally does not qualify. If you rented the property to others, for example, that would qualify. The lease must be long enough to show investment intent. Consult your tax advisor.

Q: Can I sell a vacant piece of land and buy an apartment building?
A: Yes. Any investment real estate in the United States qualifies for a real property exchange.

Q: Can I buy a property in another State?
A: Yes. You can purchase anywhere in the United States (and the U.S. Virgin Islands, Guam and the Northern Marianas Islands). However, foreign properties (and Puerto Rico and American Samoa) do not qualify.

Q: If I own a property with someone else, but only I want to go forward with an Exchange, is that possible?
A: It depends. If you own the property as tenants-in-common, then yes. Partnerships and other entities are subject to different rules.

Q: How long must I have held a property before I can sell it in an Exchange?
A: Generally, your intent is what governs the answer to that question. If you purchased a property with the clear intent to sell it, it will probably not qualify for an Exchange. Consult your tax advisor.

Q: How long must I hold a Replacement Property before I can move into it?
A: Again, intent is what is important. If you purchased a property with the clear intent to move into it as your residence, even at a later date, it will probably not qualify for an Exchange. If you acquired an investment property that is later converted into your primary residence, you must hold that property for at least five years to exclude gain under IRC§121 (principal residence exclusion). Consult your tax advisor.

Q: Can I sell my vacation home?
A: Vacation homes do not qualify as investment property if the taxpayer uses the property for personal purposes for the greater of 14 days or 10% of the number of days rented per year. Personal use includes use by related persons, unless they are using the property as a principal residence, and they are paying fair market rent.

Q: What is the rule when selling to or buying from a “related party”?
A: If selling the Relinquished Property to a related party, that property must be held for 2 years. Purchasing a Replacement Property from a related party may not qualify in many circumstances. Consult your tax advisor.

Q: Can I acquire more than one piece of property?
A: Yes. Just make sure the properties to be acquired conform to the “identification rules.”

Q: Can I sell 2 properties and buy 1?
A: Yes, but the clock for your timing requirements starts running from the close of your 1st sale property.

Q: Can I sell a piece of real estate and buy a lease on a property?
A: Yes, as long as the term of that lease is 30 years or more (remaining term, including options to extend).

Q: What is the difference between an “Exchangor” and a “Dealer”?
A: An Exchangor’s intent is to exchange property for productive use in trade or business, or for investment. A Dealer is conducting his/her normal business, holding property as “inventory” primarily for sale. If you are classified as a “Dealer,” you will not qualify for a 1031 Exchange.

Q: Can I refinance my Replacement Property after I have completed my exchange?
A: Yes, but timing and intent could be questioned. Consult your tax advisor.

Q: If I am a seller of California real estate and enter into a 1031 Exchange, will I be subject to California withholding?
A: If you complete California Form 593-C, Real Estate Withholding Certificate for Individual and Non-Individual Sellers, indicating that you are completing a 1031 Exchange, and submit it to your Escrow Company, you will be exempt from withholding at the time of closing. However, if you take any cash out of the transaction, you will be subject to the 3 1/3% withholding.

Q: If I need a deposit for my target Replacement Property, can I use the money being held on my behalf by PWB?
A: Yes. We require a written request. Call or click on Forms, for the Request for Earnest Money Deposit Form.

Q: I have heard about Construction and Reverse Exchanges. Does PWB facilitate those?
A: No. PWB only facilitates Delayed Exchanges. If you are contemplating using exchange funds on a property after you take title to it, please call to discuss prior to starting your Exchange.

Q: If I want to start an Exchange, when should I contact PWB?
A: You should contact us when you open escrow on your Relinquished Property (the property you are selling). The exchange documents must be signed and in place BEFORE YOU CLOSE ESCROW, so it’s best to give us at least a couple days to do this. The sooner you let us know after Escrow opens, the better.

Q: What if I have closed Escrow, but haven’t touched the proceeds?
A: Sorry, too late. You must show intent to do an Exchange prior to closing by signing an Exchange Agreement with an accommodator.

Q: If I am doing a delayed Exchange, do I really need an Accommodator?
A: Yes. The IRS requires the use of a non-related, third party to accommodate a delayed Exchange.

The above information is for general information purposes only. PWB cannot give tax or legal advice. You should discuss your individual transaction with your tax advisor.
If you have further questions about the rules of a 1031 Exchange, or would like to start an Exchange, please call (877-343-1031) or email Wendy Oshiro.