DEFINITION of 'Qualified Exchange Accommodation Arrangements'

A strategy used in some 1031 exchanges where a third party, known as an "accommodation party," temporarily holds the real estate investor's relinquished or replacement property. The purpose of this arrangement is to help investors comply with section 1031 of the Internal Revenue Code, which allows investors to defer taking a capital gain or loss on the sale of real estate as long as the relinquished property is replaced by a "like-kind" property. Qualified exchange accommodation arrangements, while still subjecting investors to strict guidelines for the sale and purchase of like-kind properties, increase flexibility in the timing of the sales and simplify the investor's ability to qualify for the tax deferral.

BREAKING DOWN 'Qualified Exchange Accommodation Arrangements'

This strategy was in use for many years, but was not formally recognized by the IRS until 2000. The IRS's approval of the procedure and establishment of specific qualification guidelines made investors' compliance with 1031 exchange rules more straightforward.


Because the purpose of such a transaction is to hold a property temporarily, these are also known as "warehouse transactions".

RELATED TERMS
  1. Reverse Exchange

    A type of property exchange wherein the replacement property ...
  2. Section 1031

    A section of the U.S. Internal Revenue Service Code that allows ...
  3. Like-Kind Exchange

    A tax deferred exchange that allows for the disposal of an asset ...
  4. Replacement Property

    Any property that is received as a replacement for property that ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has ...
  6. Property Management

    The administration of residential, commercial and/or industrial ...
Related Articles
  1. Investing

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
  2. Taxes

    Trade Properties To Keep The Taxman At Bay

    Like-kind exchanges can mean a much lower tax bill on real estate for savvy investors.
  3. Taxes

    How Does a Tax-Free Exchange Work?

    In regards to the sale of property, particularly in real estate, a 1031 exchange is increasingly being recognized for its tax benefits to investors of all levels.
  4. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  5. Taxes

    How To Prevent A Tax Hit When Selling A Rental Property

    Rental property ownership has its benefits but when selling you can face a big tax hit. Thankfully there are ways to reduce your capital gains exposure.
  6. Investing

    Flipping Houses: Is It Better Than Buy and Hold?

    Real estate investors can flip a property or use it for cash flow. Find out which will work in your neck of the woods.
  7. Taxes

    Sell Your Rental Property For A Profit

    Being a landlord can be taxing, especially when you want to sell. Find out how to reduce your burden.
  8. Investing

    What You Should Know About Real Estate Valuation

    Anyone involved in a real transaction can benefit from gaining a basic understanding of the different methods of real estate valuation.
  9. Investing

    Your Property Tax Assessment: What Does It Mean?

    The amount of a property tax bill is based on the property’s value, the exemptions it qualifies for, its use and the local property tax rate.
  10. Financial Advisor

    Illiquid Real Estate: Correlation Pros and Cons

    Stock and bond markets are moving more closely in tandem with each other. Is illiquid real estate the vaccine for this correlation?
RELATED FAQS
  1. What criteria does a property need to meet to be considered an 'investment grade' ...

    Learn what it takes for institutional investors to consider a property "investment grade," such as real estate investment ... Read Answer >>
  2. How can I make equity investments in real estate?

    Invest in real estate equity through buying and selling real property or through other more liquid investments like real ... Read Answer >>
  3. What does asset management mean in regards to real estate?

    Find out what role asset managers play in the real estate markets, how real estate portfolios are selected and why entrepreneurial ... Read Answer >>
  4. What do real estate investors look for in a property?

    Profit from real estate investments by either flipping homes or becoming a landlord. Learn best practices for a successful ... Read Answer >>
  5. What is the difference between real estate and real property?

    Understand how real estate is legally different from real property and the implications of that difference for each property ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center