The purpose of the Exchange, in most cases, is to defer the payment of taxes on some or all of the capital gain in the property that is exchanged. The Internal Revenue Service, through Section 1031 of the Revenue Code, recognizes that an exchange of like-kind property is not a taxable event. Under Section 1031 there is no taxable gain or loss recognized where property held for investment or business is exchanged solely for property of like-kind which is to be held for investment or business.

First American Exchange Corporation will provide an Exchange Agreement defining the exchange transaction and setting forth the obligations of all parties. This agreement must be approved by the taxpayer's tax advisor. There are two parts to an exchange transaction, the "sale" of the "Relinquished Property" and the "purchase" of the "Replacement Property."

The Replacement Property must be identified within 45 days of the first Relinquished Property closing. The entire transaction must be completed by the earlier of (1) 180 days from the first closing date; or (2) the due date of your tax return (including extensions) for the year the property was sold.

First American Title Insurance Company will customarily hold the funds derived from the sale of the Relinquished Property pending completion of the Exchange. First American Title Insurance Company provides the assurance that all funds derived from the sale of the Relinquished Property will be available to complete the exchange. First American Exchange Corporation is a subsidiary of First American Title Insurance Company, which is acknowledged as one of the nation's leading title insurers, tracing its origin to 1889.

First American Title Insurance Company will issue an Exchange Closing Protection Letter on funds held to insure against loss or misuse of these funds by either First American Exchange Corporation or the financial institution chosen by First American Title Insurance Company in which the funds are held during the Exchange. A "Growth Factor" equal to the total interest earned will help offset the expenses incurred.