Exchange First

Exchange Last (click here)

The other basic form involves the transfer of the Old Property to an EAT as part of a 1031 exchange at the beginning of the process (hence, the term “Exchange First”). The QI executes a simultaneous 1031 exchange in which the EAT, through the QI, is the buyer of the Old Property and the Exchanger, through the QI, is the Buyer of the New Property. The Exchanger acquires the New Property directly from its seller and takes title to it without the involvement of an EAT. The QEAA stipulates that it is the Exchanger’s responsibility to find a buyer for the Old Property and consummate a sale within the 180 day exchange period. When a buyer is found, the Exchanger negotiates a purchase and sale contract on the EAT’s behalf and title is then transferred to the buyer in a normal settlement process.

If the Old Property is not sold with 180 days, the best approach is to execute a rescission of the sale of the Old Property to the EAT so that no taxable event has occurred. If done properly at the end of a failed Exchange First, the rescission results in the Exchanger owning both properties but having no gains associated with the sale of the Old Property.


Petroleum Strategies, Inc. does not give tax or legal advice. The information contained herein should not be relied upon as a substitute for tax or legal advice obtained from a competent tax and/or legal advisor.