While 1031 exchanges permits the sale of relinquished property
anywhere in the U.S.
1031 30,000 No gain recognized because boot did not exceed total amount of the gain Basis in replacement property Basis in relinquished property
190,000 Gain excluded under Sec.
Investors (exchangers) may sell investment property without paying capital gains tax if they replace relinquished property
with like-kind investment property.
With the delayed method, a taxpayer first sells the so-called relinquished property
and then acquires a replacement property within 180 days.
Surprisingly, some savvy real estate investors may not be aware of the requirement that both the relinquished property
being sold and the replacement property being purchased must be "held for investment or productive use in a trade or business".
In a deferred like-kind exchange, a taxpayer is bound by certain time limits in which to complete an exchange, including the requirement that the replacement property generally must be received within 180 days of the disposition of the relinquished property
or, in the case of a reverse exchange, the "parked" property must be transferred to the taxpayer as replacement property within 180 days after the accommodation party acquires title of the parked property; see Sec.
Investors can use reverse construction exchanges when they have to buy the lot before they sell the relinquished property
An SLC can provide security protection against failure by another party to comply with the two statutory time periods that apply to all IRC section 1031 exchanges: 1) replacement property must be identified within 45 days of transfer of the relinquished property
and 2) replacement property must be delivered by the earlier of 180 days after transfer of the relinquished property
or the due date of the return for the year the relinquished property
The basics of a 1031 exchange are that the investor must identify the properly (could be multiple) that it intends to purchase within 45 days from the date of the sale of its investment property (relinquished property
) and close on that property (replacement property) within 180 days from the date of the sale of the relinquished property
The taxpayer was allowed to offset the boot arising from the relief of liabilities on the relinquished property
with the new mortgage incurred on the replacement property.
The proposed regulations do not address the so-called reversed-Starker situation, where the seller acquires replacement property before locating a buyer for the relinquished property
. The IRS has asked for comments on these transactions but has not yet decided what treatment is appropriate.
The purchaser's relinquished property
was exclusively sold by Barbara Dansker and Matt Fotis of Marcus & Millichap Manhattan.