Understanding the Reverse Exchange

A Reverse, or Parking, Exchange is where an Exchanger purchases their Replacement Property prior to selling their Relinquished Property. The typical order of events in a Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange occur in reverse, hence the name.

However, for a valid Reverse Exchange the (“Exchangor” or “Taxpayer”) Person intending to conduct a 1031 tax deferred exchange, who transfers a relinquished property and thereafter receives a replacement property. Exchanger cannot own the Relinquished Property and the Replacement Property at the same time. Learn more about the process and procedures of a Reverse Exchange in this flyer.