A Deferred Exchange is one in which you the Exchangor, transfer property you use in business or hold for investment and later you receive like-kind property you will use in business or hold for investment. (The property you receive is replacement property.)

The transaction must be an exchange (that is, investment property for investment property) rather than a transfer of property for money used to buy replacement property.

If, before you receive the replacement property, you actually or constructively receive money or unlike property in full payment for the property you transfer, the transaction will be treated as a sale rather than a Deferred Exchange.

In that case, you must recognize gain or loss on the transaction, even if you later receive the replacement property. (It would be treated as if you purchased it.)

You constructively receive money or unlike property when the money or property is credited to your account or made available to you.

You also constructively receive money or unlike property when any limits or restrictions on it expire or are waived.

Whether you actually or constructively receive money or unlike property, however, is determined without regard to certain arrangements you make to ensure that the other party carries out its obligation to transfer the replacement property to you.

    For Example

if you have that obligation secured by a mortgage or by cash or its equivalent held in a qualified escrow account or qualified trust, that arrangement will be disregarded in determining whether you actually or constructively receive money or unlike property.

       Deferred Exchange

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