First, what is a "true reverse exchange?"
Reverse Exchange
The reverse exchange allows a real estate investor to acquire his or her like-kind replacement property first and then subsequently dispose of (sell) his or her relinquished property later provided he or she comply with the specific 1031 exchange deadlines.
True Reverse Exchange
A true reverse exchange refers to a transaction that is structured such that the real estate investor would acquire and actually take title to the desired like-kind replacement property. This would result in the real estate investor owning both the relinquished property that has not been sold yet at the same time they own the new like-kind replacement property.
This transaction is not permitted at this point in time. The real estate investor is not permitted to own both the relinquished property and the like-kind replacement properties concurrently. So, the answer is no, a true reverse exchange is not permitted.
Permissible Reverse Exchange with a Parking Arrangement Under Revenue Procedure 2000-37
However, the IRS did issue Revenue Procedure 2000-37 that does allow a real estate investor to structure a parking arrangement whereby an Exchange Accommodation Titleholder can acquire and hold or "park" title to one of the real estate investor's properties in order to buy enough time to sell the existing relinquished property and structure a concurrent 1031 exchange and still defer the payment of their depreciation recapture and capital gain taxes.
Stay tuned for my next couple of posts that will cover reverse exchanges in more detail.
Website for Additional Information
You can visit Exeter Reverse 1031 Exchange Services, LLC's website for more detailed and in depth information on reverse exchanges.
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You can also reach a senior executive of Exeter Reverse 1031 Exchange Services, LLC anytime you would like to speak to them - 24 hours a day, 7 days a week.
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