1031 Exchange Specialists,

A National Qualified Intermediary

Inc.

[1031 ESI]

 

Corporate Headquarters:
1155 Asbury Avenue
Ocean City
New Jersey 08226

Ocean City, NJ: 609-398-1031

Naples, FL: 877-513-1031

   Fax: 609-398-0500

Web: www.1031esi.com
Email: info@1031esi.com
Independently Owned and Operated
 
SERVICING ALL 50 STATES!
 
Your Tax Savings is Our Business! 


Reverse Exchanges

 


Reverse Like-Kind Exchanges:  How Do They Work?


Occasionally, investors are presented with an opportunity to acquire a replacement property prior to selling or passing title to the property they currently hold as an investment. 

 

Can an investor acquire a property before they sell their current property and still be able to defer the taxable gain on their property?


In September 2000 the IRS published Revenue Procedure 2000-37 providing "safe harbors" or guidelines for those wishing to perform a like-kind exchange in reverse.  Although Revenue Procedures are not regulation, the reverse exchange will be permitted if the Revenue Procedure is followed to the letter.

 

What are the general requirements of a reverse exchange?

 

(1) A third-party Exchange Accommodation Titleholder (EAT) takes title or "such other indicia of ownership" to the replacement or relinquish property (called "parking").  The EAT cannot be a disqualified party (an agent or related party of the taxpayer).

 

(2) The taxpayer must have a bona fide intent to complete an exchange.

 

(3) A Qualified Exchange Accommodation Agreement must be executed between the taxpayer and the EAT.

 

(4) Replacement or relinquish property identifications must be made by the 45th day following the acquisition of the property by the EAT.

 

(5) The EAT must transfer title to the taxpayer (replacement property parked) or a third party buyer (relinquish property parked) by the 180th day following the acquisition.