Steamboat Springs 1031 Exchanges

A reverse exchange, which is sometimes referred to as a parking arrangement, is the opposite of a normal 1031 exchange. It occurs when the replacement property is acquired before the relinquished property is sold. You might prefer this option if you find a real estate option that you would like to act upon before you have had time to consider selling another investment property. One of the benefits of a reverse 1031 exchange is that it gives you time when looking for a replacement property. This is because you will not be pressured into finding a replacement property in 45 days.

A common misconception of a reverse exchange is the idea that you own both the replacement and relinquished property at once, which is not permitted if you are seeking an exchange. The transactions involving your new property are preformed along with an Exchange Accommodation Titleholder (EAT). It is the responsibility of the EAT to “park” one property until you are able to sell your other. This transaction is done along with your Qualified Intermediary (QI). With the EAT you will devise a Qualified Exchange Accommodation Agreement (QEAA), which outlines the responsibilities of both parties in the transaction.

The EAT has the option of acquiring and “parking” the title of either the replacement or the relinquished property. The first possibility is the Exchange Last option. In this structure, the title of the replacement property is given to the EAT and you retain ownership of the relinquished property until its sale. This is the best option to pursue if you are purchasing the replacement property with cash or the seller is providing short term financing. This option is also useful if you do not know, as of yet, which property you will be relinquishing in the exchange. The second option is the Exchange First option. In this structure the title of the relinquished property is given to the EAT and you gain ownership over the replacement property. This option should be pursued if you need to use financing from another source.

Deadlines for a reverse 1031 exchange are essentially the same as they are for a regular 1031 exchange. Once the replacement property is purchased you have 45 days to determine which property you intend to relinquish. You then have the 180 days from the purchase of your replacement property to sell your relinquished property. Reverse 1031 exchanges tend to be more involved and costly and the decision should be carefully analyzed and discussed.

We are happy to help you in with 1031 exchanges, but we also rely on the experts to help make sure this is a smooth and painless process. While contemplating benefits of 1031 exchanges we strongly encourage you to consult a tax official to discuss any unanswered questions or special circumstances, which may apply to you specifically.

Jon Wade  – Broker Owner  Colorado Group Realty, LLC
970-819-6930 or jon@mybrokers.com
509 Lincoln Ave Steamboat Springs, CO 80477