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REVERSE 1031  

Reverse 1031

An investor may want to use a 1031 exchange in acquiring property, but may not wish to delay making an offer on a new property until the old one is sold. For example, an investor may find a desirable property before he or she actually finds a buyer for the property he or she wants to sell. The investor may be concerned about waiting, as some other investor could snap the new property up at any time. A reverse exchange may be used in this situation.

Reverse exchanges have many of the same requirements as regular 1031 exchanges. In a regular 1031 exchange, the buyer uses an intermediary to receive the proceeds from the sale of the relinquished property. That money is used in acquiring the replacement property. By contrast, a second intermediary is used in a reverse exchange. This person, called an accommodation titleholder (AT), receives the title to the new property before the old property is sold.

The AT may take possession of either the property the investor is selling or the replacement property. The AT holds the title to the property for a period of 180 days, allowing the investor time to find a buyer for the relinquished property. In some cases, the same person is used as both intermediaries.

The reverse exchange allows the same capital gains tax deferment as the regular 1031 exchange. In both situations, however, the replacement property must be of equal or greater value to the original property. At TM 1031 Exchange, we specialize in helping investors find appropriate properties without delay. Let us know your needs. You can contact our team toll-free at 1-877-4TM-1031 or via e-mail here

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