Which scenario is an example of a reverse exchange?

Which scenario is an example of a reverse exchange?

• A. A homeowner finds and closes on a house and then sells their existing home
• B. A homeowner sells a property and then finds and closes on a new property
• C. An investor finds and closes on an investment property and then sells another investment property
• D. An investor sells a property and then finds and closes on another investment property

Answer: (C)

Reverse exchanges are tax-deferment moves where the replacement property is acquired before the relinquished property is sold. This structure often needs a qualified intermediary or an exchange accommodation arrangement to hold title during the swap, since you’re effectively owning two properties at once for a period. In the scenario described, an investor finds and closes on a replacement investment property first, then sells another investment property. That exact order—acquiring the replacement before disposing of the old property—embodies a reverse exchange. The other patterns described involve selling first (forward exchange) or involve non-investment property, which wouldn’t fit the reverse-exchange setup.

Reverse exchanges are tax-deferment moves where the replacement property is acquired before the relinquished property is sold. This structure often needs a qualified intermediary or an exchange accommodation arrangement to hold title during the swap, since you’re effectively owning two properties at once for a period.

In the scenario described, an investor finds and closes on a replacement investment property first, then sells another investment property. That exact order—acquiring the replacement before disposing of the old property—embodies a reverse exchange. The other patterns described involve selling first (forward exchange) or involve non-investment property, which wouldn’t fit the reverse-exchange setup.