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 exchange transactions. A pure reverse exchange was understood to mean that the taxpayer would acquire the replacement property prior to the sale of the relinquished property. The final regulations ultimately failed to allow a safe harbor for such a reverse closing sequence.