A reverse exchange can support a purchase-first sequence
You can buy replacement property before you sell the relinquished property. The transaction can require a reverse-exchange structure.
Request a review before the replacement-property purchase closes. The team needs time to review title, financing, insurance, ownership, and deadlines.
The basic structure
The federal safe harbor uses a Qualified Exchange Accommodation Arrangement. The short name for this arrangement is QEAA.
An Exchange Accommodation Titleholder holds qualified ownership in the parked property. The short name for this titleholder is EAT.
The taxpayer and the EAT sign a written agreement. The safe-harbor rules also set identification and transfer time limits.
Facts that can control the plan
- The replacement-property closing date.
- The status of the relinquished-property sale.
- The title holder for each property.
- The taxpayer and ownership entities.
- The lender's requirements.
- The required insurance coverage.
- The available cash and exchange funds.
- The presence of construction or improvement work.
- The tax advisor and attorney review schedule.
Financing can change the structure
The lender must understand the proposed title path. The loan documents and insurance must agree with that path.
Do not assume that a standard purchase loan can close with an EAT or Special Purpose Entity. Ask the lender to review the structure early.
Start the review
- Give the exchange team the purchase contract and closing date.
- Give the team the sale status and expected sale date.
- Identify the taxpayer, title holder, lender, and advisors.
- Let the advisors review the proposed QEAA structure.
- Confirm title, loan, insurance, escrow, and exchange documents.
- Complete the approved transfers within the applicable periods.
Frequently asked questions
Is buying first always a reverse exchange?
The team must review the transaction sequence and ownership facts. Do not close the purchase before that review.
Who holds the replacement property?
Under the federal safe harbor, an EAT holds qualified ownership. The approved structure can use an entity that the EAT owns.
Can my current lender finance the parked property?
The lender must approve the borrower, title, documents, and insurance. Give the lender the proposed structure before closing.
How long can the safe-harbor parking period continue?
The QEAA rules use a maximum combined holding period of 180 days. Other timing rules also apply.
Request an early reverse-exchange review
Call 888-747-1031 before the replacement-property closing. Give the purchase date and sale status first.
This page gives general information. It does not give tax, legal, lending, title, insurance, investment, or financial advice.