Qualified Exchange Accommodation Arrangements

AAA

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.

INVESTOPEDIA EXPLAINS '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. Section 1031

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

    A tax deferred exchange that allows for the disposal of an asset ...
  3. Reverse Exchange

    A type of property exchange wherein the replacement property ...
  4. Like-Kind Property

    Any two assets or properties that are considered to be the same ...
  5. Boot

    Cash or other property added to an exchange or other transaction ...
  6. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
Related Articles
  1. Can Real Estate Stabilize Your Portfolio?
    Home & Auto

    Can Real Estate Stabilize Your Portfolio?

  2. Use Real Estate To Put Off Tax Bills
    Options & Futures

    Use Real Estate To Put Off Tax Bills

  3. Trade Properties To Keep The Taxman ...
    Active Trading

    Trade Properties To Keep The Taxman ...

  4. The Irreplaceable Brand Of Donald Trump
    Investing News

    The Irreplaceable Brand Of Donald Trump

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center