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Can a 1031 Reverse Exchange help give you more flexibility?

 “I want to diversify my investment portfolio and defer capital gains tax by acquiring apartment buildings in strategic growth areas while divesting from older office buildings in mature markets, and I will have to close on the new properties before I can locate a buyer for my current properties.”

“I want to take immediate ownership of my new aircraft, but given the current economic climate, it will  take  time to sell my current aircraft at a fair price,  but I still want to capture the tax benefits of a 1031 exchange.”

“I want to sell my current property and replace it with new property that I will build while also receiving the tax benefits of a 1031 exchange.”

Have you experienced any of these challenges while considering a 1031 exchange? A 1031 Reverse Exchange can help.

A Reverse Exchange allows an exchanger to have a third party acquire your current property (known as relinquished) or your replacement property until you are able to sell the relinquished property to close the exchange. You need to use a Qualified Intermediary that can provide an entity to act as an Exchange Accommodation Titleholder (an “EAT”) to hold one of the exchange properties (in other words “park” ownership of property). In our example, you might park the apartment building or the new aircraft with the EAT until you can find a buyer for the office building or the current aircraft. For a successful Reverse Exchange, the IRS requires you to work with a EAT. The use of a EAT helps ensure that the requirements of a successful exchange are met, including meeting the timeline requirements, avoiding tax ownership of the parked property while still having full operational control and use of the parked property, and providing all necessary documentation in the event of an audit.

When considering a 1031 reverse exchange, ensure that your EAT provides the highest levels of:

  • Expertise. You need a QI and EAT with expertise to deal with both the tax and the transaction aspects of the most basic to the most complex reverse exchange. Whether you are parking real estate, aircraft or other assets, you want experienced teams and professional looking documents that fit appropriately with your transaction and are acceptable to your tax, deal and lender advisors.
  • Security.  Your EAT should be able to provide you with a Special Purpose Entity dedicated to your reverse exchange transaction to separate your reverse exchange assets from the assets of the QI or EAT. This allows you to better monitor your reverse exchange assets and protect them from the claims of creditors of the QI, EAT or their affiliates.
  • Efficiency. You want an EAT that can facilitate a smooth transaction with seasoned professionals who can speak knowledgably with your advisors regarding the tax requirements of a reverse exchange as they relate to non-tax areas of law such as real estate, FAA requirements, sales and use taxes and others.

Learn more about NES Financial’s comprehensive 1031 Reverse Exchange Solution.

Don’t miss your opportunity to acquire the property you want—work with a QI who can provide unparalleled support during your 1031 reverse exchange. 

Curious about reverse exchanges? Speak with a sales representative today.

NES Financial welcomes your questions and opinions. Allow us to address your business needs by contacting us at here, or comment on this post below! We look forward to hearing from you!

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2017-05-14T04:03:16+00:00 April 12th, 2012|Categories: 1031 Exchange, Uncategorized|Tags: , , |