This is an interesting reverse exchange case study. Our client had a unique opportunity to acquire lake-front land that abutted his personal residence. The new property will be held for investment but clearly enhances his existing property. Because the equity needed to close was tied up in an existing ocean-front rental condo in Florida, the mechanism of a reverse exchange was utilized.
We created a legal entity to acquire the existing beach-front condo using loan funds the client provided. The funds came to us as the Qualified Intermediary, and the client went ahead and acquired the lake-front land. The low basis in the beach property shifted once it was sold to our entity and now this basis resides in the lake property. In these types of exchanges the client has 180 days to sell the existing property (now titled to the new legal entity).