A deferred exchange is an exchange in which, pursuant to an agreement, the taxpayer transfers property held for productive use in a trade or business or for investment (the "relinquished property") and subsequently receives property to be held either for productive use in a trade or business or for investment (the "replacement property"). 

There are many ways to successfully structure a deferred exchange.  The Internal Revenue Service recently issued regulations which establish the "qualified intermediary" or accommodator as a safe harbor in effecting a tax deferred exchange. 

Via an exchange agreement, the qualified intermediary acquires the relinquished property from the taxpayer, subsequently sells it to the buyer and holds the funds for use in the acquisition of the replacement property to be identified by the taxpayer. 

The taxpayer has 45 days from the close of escrow of the relinquished property to identify the property or properties to be acquired by the intermediary as replacement property. There are very specific rules that must be followed in the identification process to avoid the entire exchange being disallowed.   

Once the replacement property has been identified, the taxpayer has 180 days or the due date of his tax return plus extensions to close the escrow on the replacement property. The intermediary acquires the replacement property that has been identified by the taxpayer under the terms so arranged and subsequently exchanges it to the taxpayer to complete the deferred exchange. 
The exchange process is very technical. The exchange must be carefully structured and each step must be carefully  documented to obtain the desired result of a successful transaction.

Asset Services, Inc. recommends contacting your CPA or legal advisor when contemplating an exchange.