1031 Exchange Blog
In this 1031 FAQ video, Jeff Peterson talks about reverse 1031 exchanges within the safe harbor. Watch more 1031 educational videos here.
Start Your 1031 Exchange: If you have questions about reverse 1031 exchanges within the safe harbor, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
When the regulations came out for 1031 exchanges, just about everybody gravitated towards the safe harbor exchanges, which allow for a sale to occur to a third party and a purchase to occur within 180 days. The only real curve ball is that under the safe harbor you have to identify in writing your replacement property within 45 days.
The regulations do not prohibit you from doing a non-safe harbor straight exchange. But in a non-safe harbor exchange it's much more difficult to get the stars into alignment because you don't have the benefit of the deferred exchange timeline. Typically, in a non-safe harbor exchange would have to be a direct swap where you sell your relinquished property to party A and you simultaneously receive your new replacement property from party A (the same party). It’s like the old fashioned horse swap, I'll give you my horse in exchange for you giving me your horse.
A non-safe harbor exchange does not require you to hire a qualified intermediary but does require that you do a simultaneous swap with the party that you are giving your relinquished property to. For that reason it’s much more difficult to do a non-safe harbor straight exchange and given that the fees and expenses for doing a deferred safe harbor exchange are so minimal most people avail themselves with the protections of the safe harbor even when they are doing a quick or simultaneous exchange because they want the certainty that the safe harbor protections provide.
Start Your 1031 Exchange: If you have questions about safe vs. non safe harbor exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2016 Copyright Jeffrey R. Peterson All Rights Reserved
Many people are interested in reverse 1031 exchanges but they are not interested in the 180 holding period cap. The big complaint about rev proc 2037 is that you are only allowed to park a property for up to 180 days, and you can't do much in 180 days. This is especially true if you're doing a construction reverse exchange where you want to construct an enormous amount of improvements. Here are some important things to remember about non-safe harbor 1031 exchanges.
It's important to note that the IRS does not necessarily say that non-safe harbor exchanges are bad, or make any judgments about them, they just say “if you want to be inside of the safe harbor, stay within the four corners of this revenue procedures.”
Why would you ever want to go outside of the safe harbor? The primary reason is if you need to park a property for longer than 180 days.
Start Your 1031 Exchange: If you have questions about Non-Safe Harbor Exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2016 Copyright Jeffrey R. Peterson All Rights Reserved
