Reverse Exchanges Work A properly formatted reverse exchange will be treated as an I.R.C. 1031 exchange. In Biggs v. Commissioner the exchangers arranged for an intermediary to purchase the replacement and later exchange it for the relinquished as it sold. It succeeded as the court agreed the exchanger did not have control over the replacement and had no agency relationship with the intermediary. Are Unregulated There are currently no regulations which show the investor how to complete a reverse exchange. It is assumed that there are no time limits, it is believed that an intermediary can borrow to purchase the replacement, it is assumed that a properly formatted exchange agreement and an intermediary following the agreement will insulate the exchanger from agency and control problems.
Nobody knows for sure.
Reverse exchanges are an alternative only when there is no other way to acquire a property which is crucial to the exchanger.