IRS Issues Long Awaited Reverse Exchange Rules

During the one-year period between the promulgation of the 1990 proposed exchange regulations and the issuance of the final regulations in April of 1991, the IRS solicited comments in regard to allowing pure reverse exchangereverse exchange transactions. A pure reverse exchange was understood to mean that the taxpayertaxpayer would acquire the replacement propertyreplacement property prior to the sale of the relinquished propertyrelinquished property . The final regulations ultimately failed to allow a safe harborsafe harbor for such a reverse closing sequence.