Reverse Exchanges Is There Something New

If you’ve heard there’s something new in reverse 1031 exchanges, read on. Some firms point to a recent court ruling as showing policy change. In this episode, David explains that’s not true, it’s just a flexibility in setting up 1031 exchanges that his firm has always offered.

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Today we’re talking with David Moore, Co-Founder of Equity Advantage, a firm that specializes in tax-deferred investments, in particular IRS Section 1031 exchanges.

David, with reverse 1031 exchanges, is there something new?

David Moore: Well, not really. That’s a good question, and something that’s sort of irritating at this moment to me, but our company’s roots go back to 1987, and we’ve always handled things with respect to what black and white or very little black and white there is in IRC 1031. And with reverse exchanges, you’ve always had the option of working inside or outside what guidelines are there, and in 2000, we unfortunately got guidelines and safe harbors through Rev. Proc. 2000-37, which contained, like I said, some safe harbors that … It’s different, because a safe harbor, you either choose to work with, or within, or outside, and there was a court case in 2016. Of course, it’s the Ninth Circuit. We all know the Ninth Circuit. Pretty liberal ruling, court case with George Bartell that some title companies now are all of a sudden saying, “Hey, the law’s changed. This is all new opportunity.”

What We’ve Always Done: Provide Great Information

And the bottom line is, that case just ruled in favor of the taxpayer, and in that transaction, it worked outside the safe harbors, and that’s something that our firm’s always given the option of doing. It’s really, when we’re talking about what black and white is in the code, and what gray is in the code, anytime we’re in a gray area, we do our best to arm our taxpayer, our client, with information that they can take to their tax and legal people to make a well-informed, correct, investment decision for them. And whether they choose to work inside or outside, it’s totally up to the taxpayer and their tax counsel how they move forward. Our job, once again, is to arm them with the information to make that intelligent decision.

So there’s some flexibility in arranging 1031 exchanges for clients?

David Moore: Yes, there is, and it’s typically, the issues that come up are based upon the company you’re working with in these gray areas. Many times, I’ve seen accommodators through the years, where they will say, “No, you cannot do this,” and if you push and you say, “Okay, well, this is what the code says,” …the accommodator is not supposed to give tax or legal advice. And that’s why, as I said earlier, we’re going to provide them information that they can take to their tax and legal counsel, but there are so many gray areas where it’s really, it’s up to the discretion of their taxpayer and the tax counsel. And when the accommodator takes a hardline stance saying, “You cannot do this,” it’s their opinion many, many times.

1031 Exchange Timing is Not Flexible

Now, if we’re talking timelines, those are hard lines. There are hard lines in the code, but there’s lots of gray. Any time we’re dealing with gray, as the latest decision on reverse, as this Bartell case, once again, we’re just looking at a situation where somebody chose to work outside the safe harbors, in this particular court case, they ruled in favor of the taxpayer; and this is not new. This has always been possible, and it’s just a question of whether the accommodator is going to allow it to happen and/or how they’re going to inform their taxpayer and the taxpayer’s tax counsel, as to what is truly possible.

Thank you, David. Listeners may call 503-635-1031 or can visit for more information.

If you’re looking at a reverse 1031 exchange, or any 1031 exchange, you need to know what is and is not allowed under the law. Look no further than the professionals at Equity Advantage. Call to get started today!