REVERSE EXCHANGE

In a competitive market, finding suitable Replacement Property within the 45-day Identification Period can be difficult. A Reverse Exchange allows for the Replacement property to be identified and purchased prior without consideration of a 45-day regulation.

If an income-generating Relinquished Property is sold first, then income ceases until the Replacement Property is identified and purchased which could take up to 180 days with a traditional 1031 Exchange. Acquiring the Replacement Property first would allow the Exchanger to
continue to generate income on the Relinquished Property, as well as potentially on the Replacement Property through a Reverse Exchange.

If the Exchanger operates their business in the Relinquished Property, they typically cannot shut down operations during the time it takes to acquire the Replacement Property. Acquiring the Replacement
Property first allows them to relocate their business in a manner that minimizes business interruptions.

Sometimes the seller of the Replacement Property insists on the transaction occurring on or before a particular date, but the buyer of the Relinquished Property cannot complete the acquisition by that date. While the Exchanger hadn’t planned on a Reverse Exchange, the structure can save potentially thousands of dollars in taxes or other costs.