Reverse 1031 Exchange

How the Reverse 1031 Exchange Works

While the reverse 1031 exchange offers valuable tax benefits, it’s important to remember that it is regulated by strict guidelines. In this type of exchange, the investor has up to 45 days to pick a maximum of three real estate properties to sell after buying a replacement property. Following this, there is a 135-day deadline for finalizing the sale of the relinquished properties. The process follows the guidelines outlined by the IRS’s safe harbor guidance of revenue procedure 2000-37.

It is important to note that there are a number of requirements and restrictions that investors have to abide by. For example, you can’t hold the title of the rental property that you purchased until the exchange process concludes. Furthermore, hiring an intermediary is compulsory. This is because only qualified intermediaries can transfer titles between the two parties.

Source: Mashvisor.com / Law & Taxes Section (full URL article available upon request- not tax advice!!)