What is a Reverse Exchange?
1031 exchanges are specifically structured transactions that join together the sale of an old property and the subsequent purchase of a new property for the purpose of deferring taxes. As part of the regulations set forth by the IRS, you are required to utilize a Qualified Intermediary (QI) to facilitate the exchange. Unlike a typical 1031 exchange, you may need to buy your new property before you have sold the old one. Unfortunately, IRS regulations don’t allow you to own titles to both the old and new properties at the same time. The good news is a reverse exchange allows you to exchange property in reverse order – and yet still enjoy the tax benefits. In a Reverse Exchange, your QI must arrange to buy the new property for you and hold it for a period of time.