A reverse exchange is useful when an Exchanger wants to acquire the Replacement Property first and dispose of the Relinquished Property later on a tax-deferred basis. A reverse exchange was created to help buyers purchase a new property before being forced to trade in or sell a current property. This may allow the seller to hold a current property until its market value increases amongst other factors, thereby also increasing their timing to sell for maximized profit.
A reverse exchange is useful when an Exchanger wants to acquire the Replacement Property first and dispose of the Relinquished Property later on a tax deferred basis. A reverse exchange may be appropriate if the Relinquished Property falls out of escrow, or the Replacement Property must close before the Relinquished Property is sold or ready to close. We have listed some common reasons to consider a reverse exchange. To have a valid exchange, one of the properties must be “parked” to prevent the Exchanger from being in title to the Relinquished Property at the same time they are in title to the Replacement Property. Two Types of reverse exchanges are:
Common reasons to consider a Reverse Exchange include:
(Reverse Exchange Investopedia)
*The following links, forms, articles, or any other material regarding federal and state tax issues related to 1031 exchanges has been provided by Rodeo 1031 Exchange as a courtesy for reference and information purposes only. Taxpayers must review their specific tax situations and both state and federal reporting requirements with their independent tax advisor. As a Qualified Intermediary Rodeo 1031 cannot give legal or tax advice or opinions regarding the necessity or applicability of any forms nor are we expressing any opinion. The content and accuracy of any form or information contained herein should be decided by your tax advisor or legal counsel.
*Rodeo 1031 is a qualified intermediary. Rodeo 1031 Exchange does not provide tax or legal advice, nor can we make any representations or warranties regarding the tax consequences of your exchange transaction. Property owners must consult their tax and/or legal advisors for this information. Our role is limited to serving as qualified intermediary to facilitate your exchange.