How must title to the replacement property be held in a reverse exchange?
Unlike regular exchanges in which title to the Replacement Property goes directly from Seller to Purchaser (known as “direct-deeding”) without passing through the qualified intermediary, the reverse exchange regulations require the EAT to purchase and hold the Replacement Property in the EAT’s name pending the taxpayer’s sale of Relinquished Property. This is commonly called a “parking arrangement”, and the EAT must actually hold all the benefits and burdens of ownership, without limitation.
Related Questions
- UNDER A DEFERRED EXCHANGE, WHEN MUST THE REPLACEMENT PROPERTY BE IDENTIFIED (AND SUBSEQUENTLY ACQUIRED BY THE EXCHANGOR)?
- What happens if the taxpayer changes their mind about buying a replacement property and wants to cancel the exchange?
- Where does the money come from to purchase Replacement Property in a reverse exchange situation?
