Reverse 1031 Exchanges for Farmland

In a reverse 1031 exchange, investors can acquire the replacement property before selling their existing one and still defer capital gains taxes under IRS Section 1031 rules — a useful strategy when desirable Nebraska farmland becomes available in a competitive market before you can line up a buyer for your current acreage. Instead of selling first and buying next, this “buy first, sell later” approach lets you lock in the new property while you work to sell the old one, helping you secure the land you want without losing time in a tight market.

Because IRS rules prohibit you from owning both properties at the same time during the exchange, a third‑party entity called an Exchange Accommodation Titleholder (EAT) is used to “park” either the replacement property or the relinquished property while the transaction completes. You must then identify the property you intend to sell within 45 days and sell it within 180 days of acquiring the replacement to meet the IRS deadlines and preserve the tax‑deferred treatment.

While reverse 1031 exchanges offer valuable flexibility, they are more complex and costly than traditional exchanges and often require upfront financing, careful timing, and experienced intermediaries to navigate the rules. Working with a qualified intermediary and tax advisor familiar with 1031 and reverse exchanges — especially for agricultural real estate — is essential to ensure compliance and maximize the benefits of this advanced tax‑deferral strategy.