Can Reverse 1031 Exchange be applied for recently acquired property?

[Alex Gutenson]

We jumped on an opportunity to purchase an investment property with an existing tear down quality structure, and closed in June of this year. This property was purchased under our development business LLC with cash. No banks were involved. We are now ready to sell a similarly valued vacation home property held in our name and use these funds to build a new structure on the new property. Is it possible to sell the vacation property, and use a 1031 exchange to purchase the new property back from our LLC in our name? Or do we need to go the route of setting up the new property with an intermediary, build the new structure with proceeds from sale, and then repurchase after the new structure is completed? We prefer not to have to rush the new build because we have big plans and want to get it right, but will be applying all the proceeds from the sale of the vacation home towards the new structure.

[Dave Foster]

@Alex Gutenson, It was called a Reverse leasehold improvement exchange.  Normally you can't exchange into improvements on property you own.  Rev Proc 2004-51 started to turn the screws on this process.  and subsequent years have shown that the IRS doesn't really like them. Not prohibited but not encouraged.  And very little guidance given other than "Attorney up and Attorney Well.