J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

6.5 Qualified Exchange Accommodation Arrangements (QEAAs) for Reverse Exchanges

The like-kind exchange rules (6.1) generally do not apply to a so-called reverse exchange in which you acquire replacement property before you transfer relinquished property. However, if you use a qualified exchange accommodation arrangement (QEAA), the transfer may qualify as a like-kind exchange.

Under a QEAA, either the replacement property or the relinquished property is transferred to an exchange accommodation titleholder (EAT) who is treated as the beneficial owner of the property for federal income tax purposes. If the property is held in a QEAA, the IRS will accept the qualification of property as either replacement property or relinquished property, and the treatment of an EAT as the beneficial owner of the property for federal income tax purposes.

The QEAA rules allow taxpayers to structure “parking transactions” in which the replacement property is acquired by the EAT before the transfer of the relinquished property. However, the QEAA safe harbor does not apply if the taxpayer transfers property to an EAT and receives that same property back as replacement property for other property of the taxpayer.

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Caution

Parking Transactions

Property transferred to you by the exchange accommodation titleholder (EAT) cannot be treated as property received in an exchange if you previously ...