SECTION 1031 REVERSE EXCHANGES

A Section 1031 Reverse Exchange is appropriate when our client wishes to purchase replacement property before they are able to sell the property they intend to relinquish. Alliant National Exchange can help you with most any kind of Section 1031 Reverse Tax-Deferred Exchange.

In this situation, the IRS requires that an Exchange Accommodation Titleholder (EAT) temporarily take title to the property being purchased. Alliant National Exchange has formed a separate holding entity, Alliant Reverse Exchange Holding Company, L.L.C., to act as the EAT. They will hold the title until the client sells the property that is subject to the potential capital gains tax. Please note: The property must be sold within 180 days of closing on the replacement property.

The Reverse Exchange Process
In order to initiate a reverse exchange, the client must appoint an EAT, such as our affiliate, Alliant Reverse, and complete several documents required for the exchange, including:

• Qualified Exchange Accommodation Agreement Outlines the parties' rights and obligations and the nature of the exchange.
• Assignment of Rights and Notification Replacement Property - Assigns the purchaser's interest in the contract to the EAT and entitles the EAT to purchase property and obtain the title pending the sale of the relinquished property.
• Reverse Exchange Waiver and Release Specifies the time deadlines and client obligations in the reverse exchange process.
• Identification of Relinquished Property Identifies the property to be sold to complete the reverse exchange (completed by you, the client).

Typically the client will arrange for financing, either through a third party lender or through the seller, to facilitate the EAT's purchase of the replacement property. The lender will normally require the following documents at closing:

• Nonrecourse Real Estate Lien Note completed by the EAT
• Nonrecourse Deed of Trust completed by the EAT
• Guaranty Agreement completed by the client
• Lease Agreement or Management Agreement completed by the EAT and the client
• Settlement Statement completed by the EAT and approved by the client

Step 1.
The reverse exchange procedures require the client to identify potential relinquished property/asset to be sold to complete the exchange within 45 days from the transfer of the replacement property.

Step 2.
Once the relinquished property has been identified, Alliant National Exchange will close on the sale of the relinquished property and receive the net proceeds from the sale.

Step 3.
The proceeds from the sale will then be used to purchase the replacement property from the EAT.

Step 4.
The EAT will pay off any purchase money loans used to purchase the replacement property and immediately convey the replacement property to the client by Special Warranty Deed to complete the exchange.

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