Simple1031

Reverse Exchange — How It Works

Step 1: You found the right replacement, but haven't sold yet. Replacement found! Listed at $750,000 Wrong time Current property Not sold yet Forward exchange won't work here.

Step 1 · You Found It First

You've found the perfect replacement property, but you haven't sold your existing one yet. A traditional forward exchange requires selling first — so the IRS gives you another path: the reverse exchange.

Step 2: An Exchange Accommodation Titleholder parks the title temporarily. EXCHANGE ACCOMMODATION TITLEHOLDER (EAT) Single-purpose LLC formed by the QI TITLE / DEED Held by: EAT LLC Beneficial owner: You IRS Rev. Proc. 2000-37 Safe-harbor structure recognized by IRS for reverse exchanges

Step 2 · The EAT Parks the Title

The Qualified Intermediary forms a single-purpose LLC called an Exchange Accommodation Titleholder. The EAT takes legal title to one of the properties — you keep beneficial ownership through a written safe-harbor structure.

Step 3: The EAT acquires the replacement property using your funds plus a loan. FUNDING Your equity + Bridge loan + Lender financing routed via QI/EAT Replacement Property ACQUIRED

Step 3 · Acquire the Replacement

The EAT purchases the new property using your equity, lender financing, or a short-term bridge loan. Title is parked with the EAT — but the IRS treats the property as economically yours from day one.

Step 4: Sell your relinquished property within 180 days. Original property SOLD Day 0 · EAT bought Day 45 · ID original Day 180 SELL DEADLINE Same 180-day window as a forward exchange — just running in reverse.

Step 4 · Sell Within 180 Days

You now have 180 days from the EAT's purchase to sell your original property. Identify it in writing within 45 days. Sale proceeds settle the bridge loan or true up the equity stack.

Step 5: The EAT deeds the property to you. Exchange complete. EAT LLC Held title temporarily Job complete You (Investor) DEED OF TITLE EAT → You Recorded with county REVERSE EXCHANGE COMPLETE Capital gain deferred · Property in your name

Step 5 · Title Transfers to You

Once your original property is sold, the EAT deeds the replacement to you. The county records the transfer, the bridge loan is repaid, and your reverse exchange is complete — with capital gains deferred.