1. Two-Party Exchange (Swap)
    It is the purest form of an exchange, when two parties exchange their properties. The relinquished property title is transferred from the Taxpayer to the Buyer, and the replacement property is conveyed from the Buyer to the Taxpayer. If the properties don’t have equal values, then one of the parties pays the difference at the time of the closing.
    A Two-Party exchange is always handled by a single closing agent, and does not require a Qualified Intermediary (QI). A QI is necessary if the cash receiving party wants to purchase another Replacement property.
  2. Simultaneous Exchange
    In a Simultaneous Exchange a Taxpayer relinquishes a real property and acquires a Replacement real property at the same time through QI. The proceeds from the sale of the Relinquished property go from the Buyer to QI. QI uses the proceeds to purchase the Replacement property from the Seller.
  3. Deferred Exchange
    If at the time of the sale of the Relinquished property the Taxpayer does not know what property he wants to purchase, or the closing on the Replacement property is not simultaneous with the sale of the Relinquished property, a deferred exchange takes place.
    First Leg: Relinquished property proceeds go from the Buyer to QI. The property ownership is conveyed directly from the Taxpayer to the Buyer. The Taxpayer has 45 days to identify Replacement property, and 180 days or the due date for the tax return (determined with regard to extension) to complete the exchange.
    Second Leg: Taxpayer purchases the identified property within 180 days. QI brings the exchange proceeds to the closing. The property is conveyed from the Seller to the Taxpayer.


Taxpayer wants to acquire a replacement property before selling the relinquished property. To make reverse exchange work, someone, other than taxpayer, must take title to either Relinquished or Replacement property. More…

  1. Relinquished Property Parked
    Taxpayer conveys the Relinquished property to the Exchange Accommodation Titleholder (“EAT”), using a QI. (EAT is usually a single member LLC formed by Qualified Intermediary (QI) to take title to real property in a reverse exchange.) Then taxpayer identifies Replacement property within 45 days from the day the Relinquished property was parked with EAT, and acquires it. Within 180 days the Relinquished property gets sold by EAT to a Buyer, and the exchange is complete.
  2. Replacement Property Parked
    EAT acquires the replacement property. Taxpayer identifies Relinquished property within 45 days from the day the Replacement property was parked with EAT. When the identified relinquished property is ready to close (within 180-day period), the taxpayer exchanges the Relinquished property for the Replacement property through QI.
  3. Improvement Exchange
    Taxpayer wants to make some improvements to the replacement property using the exchange funds. QI receives the proceeds from the sale of the Relinquished property. Within 45 days from the sale of the Relinquished property Taxpayer identifies the Replacement property and the improvements to be made to the property. EAT takes title to the Replacement property, and QI makes improvements to the property by disbursing the exchange funds directly to a general contractor or sub-contractors.
    After all the improvements are made, EAT conveys the property to the Taxpayer through QI within 180-day period.
    This type of exchange is very efficient when the sales price of the relinquished property surpasses the purchase price of the replacement property.
  4. Build-to-Suit Exchange
    Taxpayer wants to purchase land and build a structure on it by using the exchange funds. This type of exchange is usually a combination of a reverse and improvement exchanges. (Same identification rules apply.) For example, a Bank needs to construct a new building and sell the existing building. The construction process usually takes a long time, the Bank parks the Relinquished property with EAT, and uses the proceeds towards the new structure. After construction is over, the Bank sells the old building, and purchases the new one from EAT though QI.

    It is important to know that taxpayer cannot build a structure using 1031 exchange funds on the land he already owns.

    NOTE: Reverse Exchanges require precise documentation and thorough planning. Call us for a FREE consultation today, and we will help you to find the optimal solution for your situation.