relinquished property

relinquished property

The first property transferred in a 1031 exchange. The property received is called the replacement property.
References in periodicals archive ?
2) The property that the taxpayer transfers is usually referred to as relinquished property, and the property received is referred to as replacement property Deferred transactions may qualify as like-kind exchanges if they are completed by the earlier of the due date of the tax return for the tax year in which the transfer of the relinquished property occurs or 180 days after such transfer.
One exchange tactic that hasn't been discussed much in recent years is the practice of refinancing the relinquished property just before it's exchanged, or the up-leg property shortly after it has been exchanged.
An independent party must act as a qualified intermediary to hold funds between the sale of the relinquished property and the purchase of the replacement property.
The basic rules for obtaining tax deferral are that the taxpayer must acquire replacement property (the new property) having equal or greater debt and equity as the relinquished property (the old property), all of the proceeds from the sale of the old property, must be reinvested into the new property acquisition and the taxpayer must receive nothing in the exchange except like-kind property.
However, safe-harbor rules prohibit property owners from possessing or accessing any of the funds generated from the sale of the relinquished property.
The basis of the acquired property will equal the basis of the relinquished property when no cash is involved.
In addition, the investor must identify a replacement property within 45 days of the closing of the relinquished property and complete the exchange within 180 days.
Under section 1031(h)(2)(B), this determination is made, with respect to the relinquished property, by looking at its predominant use in the two-year period ending on the date of the relinquishment and, in the case of the replacement property, by reference to the two-year period beginning on the date of its acquisition.
The date on which the taxpayer transfers the relinquished property is the date on which the benefits and burdens of ownership of the property are transferred.
It is sufficient that the exchange property be identified within 45 days after the relinquished property is given up, and that the identified property be received within 180 days.
The first timing requirement is that the property to be received in the exchange must be specifically identified within 45 days of closing on the relinquished property.
In 1989, Congress enacted legislation that disregards and invalidates an exchange between related parties if either related party sells either the relinquished property or the replacement property within two years.