Reverse 1031 Exchange: How Rev. Proc. 2000-37 Parking Works

A reverse 1031 exchange lets you buy the replacement property before you sell the property you’re giving up. Under Rev. Proc. 2000-37, an exchange accommodation titleholder (EAT) takes title and “parks” one of the properties for no more than 180 days. You sign the parking agreement within 5 business days, identify the property you’ll sell within 45 days, and finish everything within 180 days.

Why buying first needs its own rules

The 45-day and 180-day periods in §1031(a)(3) both start when you transfer the relinquished property. Buy first and there’s no start date. You also can’t exchange property with yourself. Rev. Proc. 2000-37 (§2.04) recounts that when Treasury issued the deferred exchange regulations in 1991, it said they don’t apply to reverse exchanges.

The revenue procedure filled that gap. If a third party holds title under a “qualified exchange accommodation arrangement” (QEAA) that meets every requirement in section 4.02, the IRS treats the EAT as the beneficial owner of the parked property for federal income tax purposes. That’s the language of section 4.01 as rewritten by Rev. Proc. 2004-51.

The QEAA requirements

Requirement	Timing	Rev. Proc. 2000-37
EAT holds “qualified indicia of ownership”: legal title, a contract for deed, or the interests of a single-member LLC that holds title	From acquisition until the property leaves the arrangement	§4.02(1)
EAT is not you or a disqualified person, and is subject to federal income tax	At all times	§4.02(1)
You have a bona fide intent that the parked property be part of a §1031 exchange	When the EAT takes title	§4.02(2)
Written QEAA, signed by you and the EAT, saying the EAT is the beneficial owner for all federal income tax purposes and both of you will report it that way	Within 5 business days after the EAT takes title	§4.02(3)
Identify the relinquished property, using the identification rules of Reg. §1.1031(k)-1(c)	Within 45 days after the EAT takes title to the replacement	§4.02(4)
Property leaves the arrangement: to you as replacement property, or to a buyer as relinquished property	Within 180 days after the EAT takes title	§4.02(5)
Combined time both properties spend in a QEAA	180 days or less	§4.02(6)

The agreement deadline is 5 business days, not calendar days, and it runs from the date the EAT takes title, so the paperwork usually has to be ready at closing. And the identification flips: in a forward exchange you identify what you’ll buy, but when the replacement is parked you identify what you’ll sell. You can name alternatives under the 3-property or 200% rules (Reg. §1.1031(k)-1(c)(4)).

Miss any requirement and the safe harbor doesn’t apply (§3.04). Ownership is then decided under general tax principles, which means arguing that the accommodation party really carried the benefits and burdens of owning the property. Section 3.02 says parking can be done outside the safe harbor, with no inference either way. That’s a facts-and-circumstances argument, not a rule you can plan around.

Exchange last vs. exchange first

Section 2.05 of Rev. Proc. 2000-37 describes two ways to park. Practitioners usually call them exchange last and exchange first.

	Exchange last (park the replacement)	Exchange first (park the relinquished)
What the EAT holds	The new property	Your old property
Sequence	EAT buys the new property. Later you sell the old one (usually through a QI) and the EAT conveys the new property to you as the exchange	EAT buys the new property and immediately swaps it to you for your old property, then holds the old property until a buyer closes
Who holds title to the new property during parking	The EAT	You
What has to happen by day 180	You sell the old property and take the new one	The EAT sells your old property

The 180-day risk sits in a different place in each. In an exchange last, if the old property doesn’t sell, the EAT is still holding your new property when the safe harbor runs out. In an exchange first, you already own the new property, and the question is whether the EAT can sell the old one in time.

Rev. Proc. 2004-51 limits only parked replacement property, so an exchange first, where the EAT parks property you’ve owned for years, isn’t affected by it.

Rev. Proc. 2004-51: you can’t park what you already own

Some taxpayers read Rev. Proc. 2000-37 as allowing them to deed their own property to an EAT and take it back as “replacement property” in exchange for something else. Rev. Proc. 2004-51 shut that down. The safe harbor does not apply to replacement property you owned at any time during the 180 days ending on the date the EAT takes title. It applies to transfers to an EAT on or after July 20, 2004.

The same revenue procedure cites DeCleene v. Commissioner, 115 T.C. 457 (2000): swapping real estate you own for improvements built on land you also own is not a §1031 exchange. That’s mainly a build-to-suit problem, covered in the improvement exchange guide.

Financing the parked property

In an exchange last, the purchase money has to exist before you’ve sold anything. Section 4.03 lists arrangements that won’t disqualify the QEAA, even when their terms aren’t what unrelated parties would negotiate:

Arrangement	Section
The same company acts as EAT and as your qualified intermediary	§4.03(1)
You or a disqualified person guarantee the EAT’s obligations, including debt to buy the property, or indemnify it	§4.03(2)
You or a disqualified person lend or advance funds to the EAT, or guarantee a loan to it	§4.03(3)
The EAT leases the property to you	§4.03(4)
You manage the property, supervise improvements, or act as contractor	§4.03(5)
Puts and calls between you and the EAT at fixed or formula prices, for up to 185 days from acquisition	§4.03(6)
Agreements to true up a change in the value of relinquished property when the EAT sells it	§4.03(7)

So the money can be your own cash advanced to the EAT, a bank loan to the EAT that you guarantee, or both. The lender, though, is lending to the titled owner, which is the EAT or its single-member LLC, not you. Raise that with the lender before you sign a purchase contract. Our replacement property financing page covers the lending side.

One caution from §3.03: the IRS can still recast a payment under these arrangements as a fee to the EAT if that’s the economic substance.

What it costs compared with a forward exchange

Fees vary by provider and by deal, so there are no figures here. These are the things that make a reverse exchange cost more than a forward exchange, which needs only a QI:

• A titleholder entity, often a new single-member LLC, that has to be formed, insured and wound down.
• Two conveyances of the parked property (into the EAT, then out of it), each with its own closing costs. Ask how your state and county treat each conveyance for transfer tax.
• A loan made to the EAT entity with your guarantee, which the lender has to agree to underwrite.
• Carrying two properties at once: debt service, insurance and taxes on the parked property while you still own the old one.
• Length of the parking period, since ask whether the EAT fee is flat or charged by the month.

Deadlines and disaster relief

Every deadline above runs in calendar days except the 5-business-day agreement window. None of them moves for a weekend. When the IRS grants disaster relief, Rev. Proc. 2018-58 §17 extends the Rev. Proc. 2000-37 deadlines as well as the forward-exchange ones, within the limits it sets. Use the deadline calculator to lay out day 45 and day 180 from the date the EAT takes title.

On the return, Form 8824 has a section on QEAAs and points back to both revenue procedures (Form 8824 instructions). Confirm the structure with your CPA or tax attorney before the EAT closes, since the 5-business-day clock starts that day. Ask each intermediary you interview whether it acts as an EAT itself or uses an affiliate, and what it charges to hold title. If the parking arrangement needs a loan, Janover Capital can look at the financing.

Sources

• Rev. Proc. 2000-37, 2000-40 I.R.B. 308
• Rev. Proc. 2004-51, 2004-33 I.R.B.
• 26 U.S.C. §1031
• 26 CFR §1.1031(k)-1
• Rev. Proc. 2018-58, 2018-50 I.R.B.
• Instructions for Form 8824 (2025)