Rev. Proc. 2000-37 – A “Parking” Transaction
Rev. Proc. 2000-37 provides that a separate entity must be formed, called an “Exchange Accommodation Titleholder (“EAT”), to take title to either the Relinquished Property or the Replacement Property and to “park the title” for up to 180 days (the “Exchange Period”). By arranging for an EAT to park one of properties, the Exchangor has technically complied with the general rule of “relinquish first, replace later” while satisfying a market-driven need to close on the Replacement Property. The EAT is disregarded as an entity separate from its owner for federal income tax purposes.
The Rev. Proc. requires that the EAT and the Exchangor enter into a written agreement, called a Qualified Exchange Accommodation Arrangement (“QEAA”), setting forth the terms by which the EAT will take and hold title. In addition to adopting the time limitations that govern the deferred exchange, Rev. Proc. 2000-37 also requires that the Exchangor make a written identification of the intended Relinquished Property within 45 days after a property is parked with the EAT.
The QEAA must provide that: (i) the EAT is holding the property for the benefit of the Exchangor in facilitating an exchange under Section 1031 and Rev. Proc. 2000-37; (ii) the EAT will be the beneficial owner of the real estate for all federal income tax purposes; and (iii) the EAT will report the acquisition, holding and transfer of the property on its federal income tax return.
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