The reverse exchange can be a great tool for completing the 1031 tax deferred exchange when the exchangor/taxpayer finds and needs to close on a replacement property prior to selling their property.  all of the same rules apply, as far as both properties must qualify as “like-kind”, 45-day identification & 180-day completion deadlines and that one balances the exchange. . . that is, purchases property of equal or greater value.

Typically, when doing a 1031 exchange, you must first sell the subject property, then place funds in the intermediary account, then find and buy the property to exchange. The advantage of a reverse 1031 exchange is that when you find the exchange property, you can direct the intermediary to buy and hold the property before the relinquished property sells.

Generally, the easiest method for completing a reverse exchange is when the exchangor is able to purchase the new property for all cash or with some seller financing.   The intermediary becomes the “Exchange Accommodation Titleholder” and park the property until the relinquished property (sale property) is sold or until the 180-day period had ended.

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