1031 QualEx

Exchange Structures

Rev. Proc. 2000-37

Reverse 1031 exchanges

A reverse exchange flips the usual order: you acquire your replacement property first and sell your current property after, with the same tax deferral. When the right property appears before your sale is ready, this is how you don't lose it.

In a standard exchange you sell, then buy. Real estate rarely cooperates with that order: the property you actually want often comes on the market before your existing property is under contract. A reverse exchange, structured under IRS Revenue Procedure 2000-37, solves the problem: an exchange accommodation titleholder acquires and “parks” the new property while you complete the sale of the old one.

The parking structure

EAT takes title

The new property is parked, held for your benefit

Your old property sells

Within the same 45/180-day clock, run in reverse

Exchange completes

The parked property transfers to you; deferral preserved

How a reverse exchange works

  1. 1

    Set the structure before you buy

    Because you cannot hold title to both properties at once and still qualify, the parking arrangement must be in place before you close on the replacement property. Call us as soon as a reverse looks likely.
  2. 2

    The replacement property is parked

    An exchange accommodation titleholder (EAT) takes title to the new property and holds it for your benefit.
  3. 3

    The clock runs in reverse

    You have 45 days to identify which property you will relinquish, and 180 days to close its sale: the same deadlines as a forward exchange.
  4. 4

    The exchange completes

    When your old property sells, the parked property transfers to you and the deferral is preserved.

Forward vs. reverse, side by side

Forward exchange

The default

Order
Sell first, then buy
Funding
Sale proceeds fund the purchase
Deadlines
45 days to identify, 180 to close the purchase
Cost
Standard intermediary fee
Best when
Your sale is under contract before you commit to a purchase

Reverse exchange

Rev. Proc. 2000-37

Order
Buy first, then sell
Funding
Cash or a loan arranged around the parking structure
Deadlines
45 days to identify what you'll sell, 180 to close that sale
Cost
Higher: an extra entity holds title
Best when
The right property appears before your sale is ready

What to know going in

  • It requires real financing planning. You are funding the new purchase before your sale proceeds exist, usually with cash or a loan arranged around the parking structure. We work with your lender so the paperwork holds up.
  • The deadlines are just as strict. If the old property doesn’t sell within 180 days, the parked property can’t complete the exchange.

Why investors bring reverses to us

Reverse exchanges are a demanding structure that many intermediaries simply won’t take on. Because 1031 QualEx is a full-time, attorney-run intermediary (exchanges are our only business), reverses are a core part of our practice, not an exotic exception. If you’ve found the right property first, call before you sign anything and we’ll map the structure with you.

Talk through your exchange before you close.

A ten-minute call is usually enough to know whether a 1031 exchange fits your sale. No cost, no obligation.