Reverse 1031 Tax-Deferred Exchanges
New Procedures

By Debbie Bannister
Exchange Resourses, Inc.

The Revenue Procedure (Rev. Proc. 2000-37) provides a Safe Harbor for reverse exchanges entered into on or after September 15, 2000 provided the taxpayer does the following:   The safe harbor allows a taxpayer to treat the Exchange Accommodation Title holder (EAT) as the beneficial owner of the property for federal income tax purposes. The parked property must be held under a Qualified Exchange Accommodation Arrangement. The EAT must hold legal title or similar ownership to the property being parked. The taxpayer must have the intent to park with the EAT either the relinquished or the replacement property as part of the 1031 tax deferred exchange. No later than five (5) business days after the transfer of ownership of the property to the EAT, the taxpayer and EAT must enter into a written agreement indicating that this is an exchange and that the accommodating party will be treated as the owner of the property for tax purposes. Within 45 days after the transfer of ownership of the replacement property to the EAT, the taxpayer must identify the property to be relinquished. No later than 180 days after the transfer of ownership for the property (replacement or relinquished) to the EAT, the replacement property must be transferred to the taxpayer or the relinquished property to the ultimate buyer. An EAT that satisfies the requirements of a Qualified Intermediary under the regulations may also enter into an exchange agreement with the taxpayer to serve as the Qualified Intermediary in a simultaneous or deferred exchange. The taxpayer can guarantee some or all of the obligations of the EAT, including secured or unsecured debt incurred to acquire the replacement property. The taxpayer can also loan or advance funds to the EAT. The parked property can be leased by the EAT to the taxpayer or enter into a property management agreement with the taxpayer.