Specializing in Tax-Deferred Property Exchanges


Parking Property

"Parking arrangements", which are sometimes referred to as "reverse exchanges," have increased in the past few years as more and more real estate professionals become acquainted with the benefits of utilizing these transactions to effect exchanges for their clients. The Internal Revenue Service has never approved pure reverse exchanges, with a couple of rare exceptions. Internal Revenue Code Section 1031 specifically notes reverse exchanges are not covered by the section. However, in September 2000 the IRS issued Revenue procedure 2000-37 which established parameters for how a reverse exchange can be completed.

Taxpayers have been successful in entering into parking arrangements, which basically involve a Qualified Exchange Accommodation Agreement (QEAA) with a non-related entity referred to as an Exchange Accommodation Title Holder (EAT). The EAT acquires a replacement property and holds that replacement property for a period of time until the taxpayer is successful in entering into an agreement to exchange out of their relinquished property.

Once the relinquished property transaction is closed, the taxpayer, through American Equity Exchange can then proceed to close the transaction with the EAT for the acquisition of the replacement property. These parking arrangements can be tricky, but as long as the real estate professionals involved know some of the pitfalls, those pitfalls can hopefully be avoided, and the transaction successfully concluded.

American Equity Exchange cooperates with its affiliated company, Reverse Exchange Services, Inc. (RES), in assisting taxpayers who must utilize parking arrangements. RES will form a single purpose entity, usually an L.L.C., to act as an EAT which will take title, in most cases to the replacement property, and "park" it until the taxpayer can complete their exchange. Taxpayers or their professional advisors who want more information on "reverse exchanges" should contact our qualified staff for more details.

For more information on Revenue Procedure 2000-37 the safe harbor reverse exchanges see the article on "New Reverse Exchange Guidelines."