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Qualified Exchange Accommodation Arrangements

What is '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.

Explaining '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".


Further Reading


Shaky foundations: moving beyond “housing tenure”
www.tandfonline.com [PDF]
… With the burgeoning of the global telephone exchange that is the Internet, it is ever … show that the poorest households often have recourse to building rudimen- tary accommodation from cheap or … investor, a social landlord does not necessarily have to make a return reflecting the …

Changing inequalities in housing outcomes across Western EuropeChanging inequalities in housing outcomes across Western Europe
www.tandfonline.com [PDF]
… With the burgeoning of the global telephone exchange that is the Internet, it is ever … show that the poorest households often have recourse to building rudimen- tary accommodation from cheap or … investor, a social landlord does not necessarily have to make a return reflecting the …

A bird's eye view of OECD housing marketsA bird's eye view of OECD housing markets
www.oecd-ilibrary.org [PDF]
… With the burgeoning of the global telephone exchange that is the Internet, it is ever … show that the poorest households often have recourse to building rudimen- tary accommodation from cheap or … investor, a social landlord does not necessarily have to make a return reflecting the …

Improvising a market, making a model: social housing policy in ChileImprovising a market, making a model: social housing policy in Chile
www.tandfonline.com [PDF]
… With the burgeoning of the global telephone exchange that is the Internet, it is ever … show that the poorest households often have recourse to building rudimen- tary accommodation from cheap or … investor, a social landlord does not necessarily have to make a return reflecting the …

Democratic accountability and the exchange-rate policy of the euro areaDemocratic accountability and the exchange-rate policy of the euro area
www.tandfonline.com [PDF]
… With the burgeoning of the global telephone exchange that is the Internet, it is ever … show that the poorest households often have recourse to building rudimen- tary accommodation from cheap or … investor, a social landlord does not necessarily have to make a return reflecting the …

Tourism and economic development: A surveyTourism and economic development: A survey
www.tandfonline.com [PDF]
… With the burgeoning of the global telephone exchange that is the Internet, it is ever … show that the poorest households often have recourse to building rudimen- tary accommodation from cheap or … investor, a social landlord does not necessarily have to make a return reflecting the …



Q&A About Qualified Exchange Accommodation Arrangements


What is a qualified exchange accommodation arrangement?

A qualified exchange accommodation arrangement is a strategy used in some 131 exchanges where a third party, known as an "accommodation party", temporarily holds the real estate investor's relinquished or replacement property.

Who should consider using a QEAA?

Anyone who wants to avoid paying taxes on real estate transactions should consider using this arrangement.

What is a Qualified Exchange Accommodation Arrangement?

A Qualified Exchange Accommodation Arrangement (QEAA) is an agreement between two parties, which allows for the exchange of property without triggering tax consequences.

How does a QEAA work?

The party receiving the property from the other party must agree to hold it until the original owner transfers another asset in exchange or sells it.

What made it easier for taxpayers to qualify for tax deferral under Section 131 after IRS approval was granted in 1997 ?

After IRS approval was granted in 1997 , it became easier for taxpayers to qualify for tax deferral under Section 131 because there were now specific qualification guidelines established by IRS .

How does this strategy help investors comply with section 131 of the Internal Revenue Code?

Qualified exchange accommodation arrangements increase flexibility in timing and simplify compliance with Section 131.

What does this strategy do?

This strategy helps investors comply with section 131 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.

How are these transactions still subjecting investors to strict guidelines for sales and purchases of like-kind properties?

These transactions are still subjecting investors to strict guidelines for sales and purchases of like-kind properties because they must meet specific requirements related to time frames, parties involved, and documentation.

Why were these strategies not formally recognized by IRS until 1997?

The IRS did not formally recognize these strategies until 1997 because they were previously considered illegal tax shelters that could only be used by sophisticated taxpayers who had special knowledge about how such transactions worked.

When would you use a QEAA instead of exchanging assets directly with another party?

You may want to use this method if you have appreciated assets that are not easily converted into cash, such as real estate or closely held stock.

What are some benefits of a QEAA?

A QEAA can be used to defer capital gains taxes and reduce taxable income.

Who can be an accommodation party?

An accommodation party can be any person who has no interest in the transaction other than to hold the property for the benefit of another.