How do you handle Reverse Exchange date setting on 8824

Question

Hi,

When you're doing a reverse exchange and you have to put down the dates for relinquished property and bought property. How do you put down the dates. The questions on the form 8824 seem to be geared towards a regular exchange. How should I read/interpret them if I am doing a reverse exchange?

Bill Exeter · Answer

The first thing you need to do throw out the term reverse 1031 exchange.  It is really not a reverse 1031 exchange.  A true reverse 1031 exchange would mean that the taxpayer would acquire and receive title to like-kind replacement property and then subsequently would sell and convey title to the relinquished property.  This does not exist.

Revenue Procedure 2000-37

What we do have is Revenue Procedure 2000-37 that allows taxpayers to structure a tax-deferred exchange by acquiring their like-kind replacement property first by using a parking arrangement.

The best way to visualize a "reverse 1031 exchange" is to look at it in two component parts.

Parking Arrangement

The first component is a parking arrangement where the taxpayer arranges for the Exchange Accommodation Titleholder ("EAT") to acquire title to one of the taxpayer's properties.

Simultaneous 1031 Exchange

The second component is a simultaneous or concurrent 1031 exchange, which is either completed in the beginning (exchange first) of the whole process or at the end (exchange last) of the whole process.

Exchange Last

The exchange last structure is the preferred structure whereby the EAT acquires and parks title to the like-kind replacement property.  The like-kind replacement property is ultimately conveyed to the taxpayer simultaneously when the relinquished property is sold and conveyed to the buyers.

Exchange First

The exchange first structure is where the simultaneous 1031 exchange occurs first or upfront so that the taxpayer acquires and receives title to the like-kind replacement property and simultaneously conveys title to the relinquished property to the EAT.

IRS Form 8824 Reporting

Therefore, since we have a simultaneous 1031 exchange, the dates to be used on Form 8824 would be the dates corresponding to the simultaneous exchange.  In an exchange last, the date the taxpayer conveys the relinquished property to the buyer and the EAT conveys the like-kind replacement property to the taxpayer would be used.  In an exchange first, the date the taxpayer conveys the relinquished property to the EAT and the Seller conveys title to the like-kind replacement property to the taxpayer would be used.