-
Always follow the timing rules. In order for an exchange
to be valid, you have to meet two requirements:
-
The replacement property
must be identified within 45 days of the closing and transfer
of the relinquished property.
-
The replacement property
must be received within 180 days of the closing and transfer
of the relinquished property or the due date (with extensions)
for the transferor’s tax returns for the taxable year
in which the transfer of the relinquished property occurs.
-
The IRS takes these rules very seriously, so they must be
strictly followed. Any deviation will trigger an audit and
your exchange will be disallowed.
-
Partnership splits are particularly complicated when they
involve a 1031 exchange. What may seem simple at first glance
could easily have unforeseen consequences, so be sure to seek
out the advice of professionals experienced with this particular
issue.
-
If you’re exchanging with a relative, special rules
apply. Basically, if either relative resells or otherwise disposes
of the property within two years, the entire exchange will be
disallowed and the tax on the original exchange must be recognized
as of the date of the later disposition.
-
It’s also possible to transact a reverse exchange, in
which the replacement property is acquired before the relinquished
property, under certain circumstances. This can be done for
a number of reasons:
1) Concern about finding the right property.
2) Picking up a great deal on distressed property.
3) The sale on the relinquished property falls apart.
4) The desire for a customized property.
-
Reverse exchanges are more expensive to undertake because of
their complicated nature, but they can still be worthwhile in
the right situation.
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Disclaimer: This article is provided for information
use only. It does not take the place of an attorney, a tax advisor,
or an accountant. Always seek out the advice of a licensed professional
before undertaking any significant change in your financial situation.
We at Valerie Fitzgerald and Associates realize that you are in the information gathering stage of your purchase and we respect your privacy. Should you have any questions, please feel free to email us at info@valeriefitzgerald.com or call us directly at 310-285-7515. If you or anyone you know is looking to buy or sell a home, please note that we can provide detailed information and access to:
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