A reverse 1031 exchange is a like-kind exchange in which the replacement property is acquired before the relinquished property is sold. Because an investor generally cannot hold both properties for exchange purposes at the same time, one of them is usually held, or parked, by an exchange accommodation titleholder (EAT) under the IRS safe harbor in Revenue Procedure 2000-37.
Key Points
- Deadlines: Under the safe harbor, the relinquished property generally must be identified within 45 days after the replacement property is parked, and the exchange completed within 180 days.
- Financing: Because the replacement property is bought before the sale closes, the purchase generally requires cash or a loan arranged before any sale proceeds are available.
- Cost and complexity: Reverse exchanges generally involve more documentation and higher fees than a standard delayed exchange.
To learn more, find your 1031 exchange deadlines, or review the 1031 Exchange Checklist.
Synonyms:
reverse exchange, reverse like-kind exchange