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1031 Exchange Case Study

When Curt Coolidge decided to leave his company and sell his Denver-based commercial satellite business to an employee, his bank referred him to us for legal guidance.

The first thing we did was tear up the simple buy-sell agreement the buyer and seller had drafted, since it didn’t appropriately protect Mr. Coolidge’s interests as a seller and the financier. For example, the agreement would have indemnified the buyer in perpetuity for certain representations and claims, when a one-year arrangement is more typical and appropriate. Also, we revised the financing aspect of the transaction so that the note would be secured by the property itself.

Similarly, we reviewed the real estate contract the two parties were prepared to use and quickly saw it was more suited to a residential transaction than this commercial sale. Among other improvements, we appropriately limited the listed property that would convey with the sale – this had been left far too open-ended in the original language.

After the sales transaction was completed, the clock started for Mr. Coolidge to reinvest his gains into a qualified investment property to avoid taxation on those capital gains, an arrangement known as a 1031 Exchange.

The commercial real estate firm of The Nesbitt Commercial Group represented Mr. Coolidge in this search and identified appropriate investment properties for him within the 45-day window mandated by the IRS.

Although Mr. Coolidge wanted The Law Offices of Eric L. Nesbitt PC to provide him legal representation on the ultimate purchase of this warehouse property, we referred him to other qualified commercial real estate attorneys given Eric Nesbitt’s strict policy of never serving as both the commercial realtor and the real estate attorney on the same transaction – avoiding any conflict of interests for his clients.

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