1031.Exchange INTELLIGENCE NETWORK
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EXCHANGE MECHANICS

Safe harbor

Also called: 1031 safe harbor · regulatory safe harbor

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PLAIN-ENGLISH DEFINITION

A prescribed structure that, when its requirements are satisfied, provides specified protection against an IRS challenge on the covered issue.

What it means in practice.

Section 1031 regulations and IRS revenue procedures contain safe harbors for common exchange mechanics such as qualified intermediaries and certain parking arrangements.

Why it matters.

Safe harbor does not mean every other tax requirement disappears; it protects the issue addressed by that safe harbor.

Additional notes.

Section 1031 regulations and IRS revenue procedures contain safe harbors for common exchange mechanics such as qualified intermediaries and certain parking arrangements.

PRIMARY / REFERENCE SOURCES

Read the source material.

irs.gov ↗irs.gov/publications/p544irs.gov ↗irs.gov/pub/irs-drop/rp-00-37.pdf
CONNECTED LANGUAGE

Related definitions.

Core 1031Qualified intermediaryA commonly used independent facilitator that enters into an exchange agreement and helps structure transfers so the taxpayer does not simply receive the exchange proceeds.Exchange StructuresQEAAA safe-harbor parking arrangement described in Rev. Proc. 2000-37.Exchange MechanicsQualified escrow accountAn escrow arrangement meeting specified safe-harbor requirements that can restrict the taxpayer’s access to exchange funds.
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