For that same reason, a taxpayer cannot use the proceeds from the transfer of relinquished property to take title to bare land and then use the remaining funds to construct a building. So, one of the tricky parts of executing a construction exchange is to find a way for the construction to be done before the taxpayer takes title to the property. Some of the alternatives are seller-constructed improvements, third party acquisition and construction, or using a party related to the taxpayer to construct the improvements prior to the taxpayer taking title. Any taxpayer contemplating the construction of replacement property should consult with an exchange professional on the options available to structure that exchange. It cannot act as the tax or legal adviser for an exchanging taxpayer.
Any person considering a tax-deferred exchange is advised to seek independent tax and legal counsel.