Problem: Dealers would not provide the trucking company with fair market trade-in prices for the old trucks and their rates for pass-through services were too high.

Solution: The Company decided to sell the depreciated trucks directly to third-party buyers, and engaged a Qualified Intermediary to defer the capital gain from the sales of the relinquished trucks into replacement trucks through an ongoing exchange program. Each time a truck was sold, a tax-free exchange was triggered. The proceeds from the sales went into the qualified escrow account and were subsequently used to purchase new trucks from the dealer as they were delivered. Timing the sales of relinquished trucks was critical to insure that deliveries of new trucks occurred within the 180 days allowed under IRC Section 1031. In some instances, sales of several relinquished trucks were combined. The pooled funds from those sales were used to purchase multiple replacement trucks delivered simultaneously. The exchange program enabled the company to upgrade their fleet, sell the relinquished trucks for their fair market value, and pay no tax.