In a 1031 exchange that’s done in reverse under rev. proc. 2037, your qualified intermediary is going to form an EAT (Exchange Accommodation Titleholder) which is generally an LLC wholly owned by the exchange company. That LLC is going to acquire the property. But you may not know that you want to do a reverse 1031 exchange when you initially sign the purchase agreement for the replacement property. Oftentimes the taxpayer will sign the contract in their name and write “and/or assigns” so they have the unfettered ability to assign that contract to the EAT prior to closing. Furthermore, if you want to put an affirmative statement in your contract, your intermediary can provide a sample for you to use or adapt that specifically states that you’re buying the property as part of a reverse 1031 exchange and you’re going to assign it to an EAT pursuant to an exchange in conformity with rev. proc. 2037 and section 1031 of the IRC.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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