Texas 1031 Qualified Intermediary · Midland & Dallas
Texas 1031 Qualified Intermediary · Midland & Dallas
In a reverse exchange you buy the replacement property before you sell the property you’re giving up. It’s how investors lock in the right deal in a competitive market without waiting on their own sale. 1031 Ventures structures reverse exchanges using an exchange accommodation titleholder (EAT), a separate entity that holds title to one of the properties until the exchange is complete.
Safe harbor reverse exchanges follow IRS Revenue Procedure 2000-37. The EAT takes title to either the new property (“exchange last”) or the old property (“exchange first”). The written parking arrangement must be signed within five business days after the EAT takes title. You must identify the property you’re selling within 45 days, and the whole arrangement must wrap up within 180 days. If you follow those rules, the IRS won’t challenge who owns the property while it’s parked.
Non-safe harbor reverse exchanges are for deals that can’t fit inside 180 days, such as a major construction project or a sale that will take longer to close. They can work, but they rely on general tax principles instead of a published safe harbor. That means more planning, more documentation and a closer look from your tax advisor.
Most of our clients fit the safe harbor. If yours doesn’t, we’ll flag it early and coordinate with your CPA and attorney before anything closes.
A build-to-suit (or improvement) reverse exchange lets you use exchange value to build or renovate the replacement property before you take title. Here’s how the safe harbor timeline usually runs:
Key point: only improvements actually in place when the EAT transfers the property count toward your replacement value. Work finished after day 180 doesn’t count, so build the schedule with room to spare.
Reverse exchanges cost more than standard delayed exchanges because the EAT has to own, insure and finance property. Here are the typical line items to budget for:
Texas has no real estate transfer tax, which helps on Texas properties. Other states may charge transfer tax on each transfer. We give every reverse exchange client a written fee quote up front.
If you’ve found the right replacement property and your current property hasn’t sold, call us before you sign the purchase contract. The structure has to be in place before the EAT takes title.
Call before your sale closes. A qualified intermediary has to be in place first.
General information only, not tax or legal advice. Reverse exchanges are complex. Review your plans with your own tax and legal advisors.
Qualified intermediary for 1031 exchanges of investment real estate, land, and oil, gas & mineral interests. Exchange funds are held in a qualified escrow account at a federally insured bank.
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