Reverse 1031 exchanges offer the same tax-saving benefits of forward exchanges, but they are structured differently. Our qualified intermediaries have been assisting taxpayers with reverse exchanges in Minnesota for decades. Contact our 1031 exchange professionals today for help with your Minnesota like-kind exchange. – 877.373.1031.
Reverse vs. Forward Exchanges
Reverse 1031 exchanges are different than forward 1031 exchanges in practice, though the end result of tax deferral is the same. As the name implies, the reverse 1031 exchange process is inverted. In a forward exchange, the taxpayer disposes of their old property, then identifies and closes on new property within the 180 exchange period. With a reverse exchange, the taxpayer acquires their new replacement property first, and then sells the relinquished property within 180 days.
The next question a lot of taxpayers have is why would you do a reverse exchange instead of a forward exchange? Well, sometimes in the world of real estate (especially in a hot seller’s market) you find the perfect replacement property and you want to snatch it up before you’re able to sell your relinquished property. A reverse exchange allows you to do this. So you can purchase an apartment building in Bemidji, and then within the following 180 days, sell your old apartment building, and still have the transaction qualify for 1031.
Reverse Exchange Requirements
The requirements for a reverse exchange are largely the same as the requirements for a forward exchange. Both properties need to be held for business or investment purposes and need to be like-kind to one another. Your new property also needs to be equal to or greater than your old property in terms of equity, value, and debt. Finally, you need to abide by the 45 day / 180 day identification periods.
Start Your Bemidji Reverse Exchange
Reverse exchanges can be more complicated than standard forward exchanges. Make sure you have all your ducks in a row by consulting with a 1031 qualified intermediary before you begin your exchange. A 1031 accommodator can help you compile your documents, answer your questions, and walk you through every step of your reverse exchange. If you live in the Bemidji area and are interested in a reverse 1031 exchange, contact our Minnesota qualified intermediaries today to discuss your options – 877.373.1031.