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. Like-Kind Property

    Any two assets or properties that are considered to be the same ...
  2. Reverse Exchange

    A type of property exchange wherein the replacement property ...
  3. Like-Kind Exchange

    A tax deferred exchange that allows for the disposal of an asset ...
  4. Section 1031

    A section of the U.S. Internal Revenue Service Code that allows ...
  5. Boot

    Cash or other property added to an exchange or other transaction ...
  6. Gentrification

    Gentrification refers to when a neighborhood or city undergoes ...
RELATED FAQS
  1. How is a savings account taxed?

    In the United States, the Internal Revenue Service considers interest earned in a savings account to be taxable income. Taxpayers ... Read Full Answer >>
  2. What are the differences between absorption costing and variable costing?

    Absorption costing includes all costs, including fixed costs, in figuring the cost of production, while variable costing ... Read Full Answer >>
  3. How can I find out which income tax bracket I am in?

    U.S. federal tax brackets are based on filing status (single, married filing jointly, married filing separately or head of ... Read Full Answer >>
  4. Can a Limited Liability Company (LLC) issue stock?

    A limited liability company, or LLC, cannot issue stock. Instead, an LLC is structured to have single or multiple owners ... Read Full Answer >>
  5. Does the tradeoff model or the pecking order play a greater role in capital budgeting?

    The static trade-off theory and the pecking order theory are two financial principles that help a company choose its capital ... Read Full Answer >>
  6. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Can Real Estate Stabilize Your Portfolio?

    History suggests that real estate can provide diversification and a hedge against inflation.
  2. Options & Futures

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
  3. Active Trading

    Trade Properties To Keep The Taxman At Bay

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

    Explaining Progressive Tax

    A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases.
  5. Investing

    Commercial Real Estate: How to Invest Like a Pro

    Investing in commercial real estate can add stability to your portfolio. Here's how to do it.
  6. Economics

    Why Working Doesn't Add Up For Many Women

    A type of tax deduction for Japanese stay-at-home wives puts a barrier on women working full time in the country.
  7. Taxes

    Tea Party Vs. Republican Party: Who Will Win In 2016?

    What agendas define the rift between the Tea Party and the Republican establishment, and which side will win the presidential nomination in 2016?
  8. Personal Finance

    Commercial Real Estate: How it Works

    The ins and outs of what commercial real estate companies do.
  9. Home & Auto

    What Are The Tax Advantages Of Buying A Home?

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.
  10. Taxes

    Corporate Tax Rates: The Highs and the Lows

    The United States is No. 2 in the world for its high corporate tax rate. There are ways around paying it, and many nations with lower rates are worse off.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center