Invest on Sullivan's Island Do a Reverse Exchange

 "You can purchase the replacement property first"


"New Reverse Exchange Safe Harbor Finalized”

A reverse exchange occurs when the replacement (purchase) property is acquired prior to closing on the relinquished (sale) property. Exchangers nationwide can now confidently proceed with a "reverse exchange" that adheres to the Revenue Procedure 2000-37 released on September 15, 2000. The new safe harbor offers welcome clarification and will make the reverse a more popular and accepted exchange variation!


Highlights of the Reverse Guidelines

  • The Accommodation Titleholder, through a "qualified exchange accommodation arrangement" (QEAA), may hold title to either the relinquished or replacement property
  • The Exchanger must have the requisite intent that the purchase of the replacement property be part of an exchange.
  • Within 45 days of purchasing the replacement property, the Exchanger must "identify" (subject to the rules in the ?1031 tax code) the relinquished property to be sold in the exchange.
  • The reverse exchange must be completed within 180 calendar days.
    The Exchanger may loan or advance funds to the Intermediary for the purchase of the replacement property.
  • The Exchanger may supervises improvements, act as a contractor or assume other management functions.


    • Additional Issues

  • If financing is involved, the lender should be consulted since the Intermediary must hold title to property.
  • The Exchanger may enter into a lease or management agreement with the Intermediary.
  • The reverse exchange may be combined with an "Improvement Exchange" to allow for additional construction improvements. However, the 180-day time limit will apply.
  • Reverse exchanges utilizing a "parking arrangement" outside this procedure may still be able to qualify for tax deferral.
  • It is critical to thoroughly scrutinize the way (such as a separate LLC for each Exchanger) the Intermediary holds title to property.


    • Information Provided by

    Asset Preservation, Inc.
    National Headquarters: 800-282-1031 or info@apiexchange.com

    This information is not intended to replace qualified legal and/or tax advisors. Every taxpayer should review their specific transaction with their own legal and/or tax counsel.
    © 2000 Asset Preservation, Inc.
    		 
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