Financing Reverse Exchanges and Safeguarding Exchange Proceeds

Abstract

Over the last several years, reverse exchanges have become a fixture of section 1031. A fluid economy and a strained financial industry send a reminder that safe guarding exchange proceeds in reverse exchanges is paramount. This Article reviews reverse exchange structures, both safe harbor and non-safe harbor, and describes how such transactions must be financed to satisfy tax law requirements and safe guard exchange proceeds. The Article is adapted, with permission, from Chapter 5 of Tax-Free Like-Kind Exchanges.

Keywords: reverse exchange, section 1031, title-parking exchange, exchange proceeds, qualified intermediary, exchange accommodation titleholder

JEL Classification: A10, D31, D63, E62, H23, H24, H25, K34