Have You Ever Heard of A Reverse Exchange?

In today's strong Commercial Real Estate market, how can you take advantage of an opportunity when it presents itself? Have you ever heard of a Reverse Exchange?

Revenue Procedure 2000-37 (Rev. Proc. 2000-37), provides guidelines for the taxpayer to acquire the replacement property before the sale of the relinquished property is completed. The reverse exchange can be the ideal solution if the taxpayer cannot delay the closing of the replacement property. The reverse exchange helps investors meet a number of objectives: 

Seize the Moment: Don’t miss out on an excellent replacement property purchase opportunity. Immediately acquire a desirable replacement property prior to selling the relinquished property. 

Protect Your Exchange: Eliminate the pressure-?lled problems presented by the 45-day identi?cation period. 

Improve the Replacement Property: Use the parking arrangement to increase the value of the replacement property by making capital improvements. 

Taxpayers can defer their capital gain taxes and obtain safe harbor treatments by following Rev. Proc. 2000-37 guidelines for a reverse exchange parking arrangement. 

Rev. Proc. 2000-37 makes it clear that the taxpayer cannot own both properties at the same time. It describes the ownership process as a “parking arrangement” because either ownership of the relinquished property or the replacement property is “parked” with an Exchange Accommodation Titleholder (EAT). To park the ownership means a deed is recorded to transfer ownership to the EAT thereby the taxpayer owns one property and the EAT owns the other. 

Parking the Replacement Property: The EAT acquires title to the replacement property with funds the taxpayer loans to the EAT. Within 180 days, the taxpayer sells the relinquished property and the EAT, transfers the replacement property to the taxpayer.  

Parking the Relinquished Property: The taxpayer conveys the relinquished property to the EAT and then acquires the replacement property under a simultaneous exchange format. During the 180-day exchange period, the EAT remains on title to the relinquished property until it is sold to a purchaser. 

Reverse/Improvement Exchange: The EAT acquires the replacement property and makes improvements to this property. The improved replacement property is later exchanged for the relinquished property within 180 days to complete the exchange. 

To learn more please contact us so we can show you how to seize the moment.

Asset Preservation, Inc. (API) is a quali?ed intermediary as de?ned in the regulations under Internal Revenue Code §1031. Neither API, EXP Realty, or Greg Schowe are authorized or permitted under applicable laws to provide tax or legal advice to any client or prospective client. The tax related information contained herein or in any other communication should not be construed as tax or legal advice speci?c to your situation and should not be relied upon in making any business, legal or tax related decision. A proper evaluation of the bene?ts and risks associated with a particular transaction or tax return position often requires advice from a competent tax and/or legal advisor familiar with your speci?c transaction, objectives and the relevant facts. We strongly urge you to involve your tax and/or legal advisor (or to seek such advice) in any signi?cant real estate or business related transaction. ? 2017 Asset Preservation, Inc. All rights reserved. 

Reproduced with permission.