Las Vegas Real Estate
Reverse Exchanges

In September of 2000, the IRS released new "safe harbor" guidelines for structuring reverse tax deferred exchanges of "like kind" real and personal property.  A reverse exchange occurs when a taxpayer acquires a replacement property before disposing of their relinquished property.  In other instances this may include build-to-suit property or property with construction needs.  Compliance with the safe harbor guidelines creates a presumption that the transaction will qualify for 1031 tax-deferred exchange treatment.

Under the new procedure, the taxpayer may enter into a written agreement (called a Qualified Exchange Accommodation Agreement) whereby the Qualified Intermediary takes title to the Replacement Property.  The Qualified Intermediary can hold title up to 180 days while the taxpayer identifies and then sells the Relinquished Property.  There are additional fees involved and careful planning is required to successfully navigate through this new safe harbor.  Other techniques for structuring a reverse exchange are still possible and should be explored before embarking on the newest procedures. With the reverse exchange, the identification timelines and rules are the same as with the delayed exchange, although there is a difference in the Identification Notice.  Instead of identifying the replacement property within 45 days, you will need to identify the relinquished property(ies).  This is the property you intend to sell to generate the sales proceeds needed to acquire your replacement property held by the Qualified Intermediary.  The entire process must be completed within 180 days to receive tax-deferred treatment.

Back to 1031 Exchange Main Page

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