What is a reverse 1031 exchange?
A reverse 1031 exchange is one where you buy the replacement property before you sell the property you’re giving up — the opposite of the usual order. Because you can’t hold both at once and still qualify, a special entity called an Exchange Accommodation Titleholder temporarily holds title to one of the properties under an IRS safe harbor until you complete the sale.
You still face the same clocks: 45 days to identify the property you’ll sell and 180 days to finish the whole exchange, both measured from when the titleholder takes the replacement.
Reverse exchanges solve the problem of a can’t-miss replacement appearing before your sale is ready, but they’re more complex and expensive and usually require financing that doesn’t depend on the sale proceeds. Read the reverse exchange definition.
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General education — not tax or legal advice. This explains how §1031 exchanges work in general terms and uses simplified assumptions. Rules and tax rates change and your situation is specific. Talk to a qualified CPA or tax attorney before you rely on any of it. See our full terms & legal notice.