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1031 Improvement Exchange Calculator
Improvement (build-to-suit) exchanges let you defer gain on a smaller replacement property by adding improvements that bring the total value up to the relinquished. This calculator checks whether the combined purchase + improvements clears the replacement value test — and sizes any shortfall that triggers boot.
Total replacement value (purchase + improvements)
$2,200,000
Fully deferred
Yes
Shortfall (taxable boot)
$0
Additional improvements needed
$0
EAT fee
$15,000
How the math works
A reverse/improvement exchange uses an Exchange Accommodation Titleholder (EAT) to hold replacement property title while improvements are made. Unlike a standard forward 1031, you can defer gain on a replacement property that needs upgrades — improvement dollars count toward replacement value.
180-day EAT hold limit applies. Improvement value above what's completed by day 180 is boot — taxable. Plan the construction schedule carefully; overruns can trigger partial boot recognition.
How to Use
- Enter relinquished property value.
- Enter replacement purchase price and improvement budget.
- Enter EAT hold period (typically 180 days max).
- Enter EAT (accommodator) fee.
- Read total replacement value and shortfall analysis.
Frequently Asked Questions
How does EAT structure work?
Exchange Accommodation Titleholder (a qualified intermediary) takes title to the replacement property for up to 180 days. You fund the purchase and improvements. At day 180, title transfers to you; any uncompleted improvements become boot.
Parked property vs improvement exchange?
Parked (reverse): EAT holds relinquished property until replacement is closed. Improvement: EAT holds replacement while you build improvements. Both use the same EAT structure but for different purposes.
EAT fees?
Typical: 1-2% of property value, capped. Plus setup legal (~$10K-$20K). Ongoing costs during the 180-day hold. Only viable for deals >$1M in deferred gain.
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