Reverse Exchange
Barron's Real Estate Dictionary:
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Reverse Exchange
An exchange of real estate whereby the party considered receives new property before surrendering the property to be exchanged.
See section .
Example: Brown has agreed to exchange his farm for a small apartment complex. He accepts the deed to the apartment complex a few weeks before surrendering the deed to his farm. (Likely, he placed the deed to his farm with an escrow agent to satisfy the other party’s need for assurance.) This allows Brown time to harvest the crop and avoids the worry of meeting the 45- and 180-day limits to identify and buy new property, imposed by internal revenue code Section 1031.
See section .
Example: Brown has agreed to exchange his farm for a small apartment complex. He accepts the deed to the apartment complex a few weeks before surrendering the deed to his farm. (Likely, he placed the deed to his farm with an escrow agent to satisfy the other party’s need for assurance.) This allows Brown time to harvest the crop and avoids the worry of meeting the 45- and 180-day limits to identify and buy new property, imposed by internal revenue code Section 1031.
| Revenue Stamps, Revenue | |
| Reverse Leverage, Reverse Mortgage |
Investopedia Financial Dictionary:
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Reverse Exchange
A type of property exchange wherein the replacement property is acquired first, and then the current property is traded away. Reverse exchanges were created in order to help buyers who found a new property that they would like to purchase before they were able to trade in a current property.
The opposite of a reverse exchange is a deferred exchange.
Investopedia Says:
Standard like-kind exchange rules usually do not apply to reverse exchanges. The IRS has created a set of safe-harbor rules that allow for like-kind treatment, as long as either the current or new property is held in a qualified exchange accommodation arrangement (QEAA).
Reverse exchanges apply only to Section 1031 property. Section 1245 or 1250 property is ineligible for this type of transaction.
Related Links:
If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer. Avoid Capital Gains Tax On Your Home Sale
Investing in rental property can generate serious income, but there's more to it than collecting rent. Tips For The Prospective Landlord
Like-kind exchanges can mean a much lower tax bill on real estate for savvy investors. Trade Properties To Keep The Taxman At Bay
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Barron's Real Estate Dictionary
Dictionary of Real Estate Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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