Reverse or Starker tax-deferred exchange (1031)


Reverse exchanges not only produce significant tax savings for you but gives you “control” over your replacement property before disposing of your relinquished property. This provides greatly enhanced planning opportunities and reduces the time pressures inherent in the 45-day “identification” requirement in a regular deferred exchange.

The new “safe harbor” guidelines (Rev. Proc 2000-37) offer special opportunities when:

  1. There is a unique opportunity to purchase an exceptional replacement property but the transaction must close quickly (before relinquished property can be sold) to meet the seller’s demands or because of unusual market conditions.
  2. More time is needed to negotiate a good price for the relinquished property.
  3. The relinquished property sale falls apart and the replacement property purchase cannot be extended.
  4. Remodeling or construction is necessary to increase the value of the replacement property to have a total tax deferral.

For more information on the “Reverse Starker” Tax-deferred Exchange, contact our general counsel and affiliated law firm Tobin, O’Connor & Ewing at 202-362-1500 and ask to speak with Stephen J. O’Connor.

Read more: Like-kind exchange