A 1031 reverse exchange is similar to a 1031 exchange except for a couple of crucial differences. Many of these same rules are in place but there are a couple of additional rules you must know about. This article will first explain the benefits of using a 1031 reverse exchange as well as the different rules that differentiate a 1031 reverse exchange from a 1031 exchange.

This first paragraph will explain why to use a 1031 reverse exchange. With a normal 1031 tax exchange, you have 45 days to identify property to buy once you have sold your property. With a 1031 reverse exchange, you are allowed to buy the replacement property in advance of selling your current property. The next paragraph will explain the key differences in rules. From the time of the purchase of the property, you have 45 days to identify which property you will sell. You then have 180 days from the time of buying the new property to sell your old property to satisfy timeline requirements as mandated by the IRS. There can be exceptions to this rule but that is something you will want to consult with your Qualified Intermediary on. Whenever you are working on purchasing a new property and plan to use a 1031 reverse tax exchange, you will want to make sure that all parties involved are aware of this particular situation.

This paragraph will focus upon the main differences between a 1031 exchange and a 1031 reverse exchange. In both scenarios, you will use a qualified intermediary to handle your transaction. With a reverse exchange, a qualified intermediary must have a single member limited liability company established specifically to use for a 1031 reverse exchange.

This may seem overwhelming to take in this information on a 1031 reverse exchange but the important point to take away is that you are helping yourself become educated. You must make sure that you hire the services of a very strong Qualified Intermediary as that will help make all the difference within the transaction. A 1031 reverse tax exchange is another vehicle you can use and put in your arsenal of real estate tools.

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