Reverse Exchange
You buy the replacement property first, before selling the old one — held by a special titleholder.
Definition
In a reverse exchange the order is flipped: you acquire the replacement property before you sell the relinquished one. Because you can’t own both at once and still qualify, an Exchange Accommodation Titleholder (EAT) temporarily holds title to one of the properties, under the safe harbor of IRS Revenue Procedure 2000-37. You still have 45 days to identify what you’ll sell and 180 days to complete everything.
Why it matters
Reverse exchanges solve a real problem — a must-have replacement that appears before your sale closes — but they are more complex and costly, and require financing that doesn’t rely on the sale proceeds. Confirm your provider supports them before counting on one.
Related terms
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.