What are the most common types of exchanges?
- Delayed Exchange : The Delayed, or Starker exchange is the most common type of exchange today. The IRS formally recognized the delayed exchange for the first time in 1984. In this exchange, the relinquished property is sold at Phase 1 (Down Leg), and after a delay the replacement property is acquired at Phase 2 (Up Leg). There are time constraints and rules that must be followed for the exchange to qualify for deference.
- Reverse Exchange : A situation where the replacement property is acquired prior to transferring the relinquished property. The IRS has offered a safe harbor for reverse exchanges, as outlined in Rev. Proc. 2000-37, effective September 15, 2000. These transactions are sometimes referred to as "parking arrangements" and may also be structured in ways which are outside the safe harbor.