A “reverse” exchange occurs when the taxpayer acquires the Replacement Property before transferring the Relinquished Property. A “pure” reverse exchange, where the taxpayer owns both the Relinquished and Replacement Properties at the same time, is not permitted. As a...
When a taxpayer intends to acquire multiple Replacement Properties, with some properties closing before the Relinquished Property sale and some properties closing after, both the Forward and Reverse Exchange structures can be combined to maximize the tax deferral. ...
How much do I have to reinvest?
What is a Reverse Exchange?
The build-to-suit exchange, also referred to as a construction or improvement exchange, gives the Exchanger the opportunity to use all or part of the exchange funds for construction, renovations or new improvements to the Replacement Property.
How long do I have to hold title?
Sometimes it is necessary or desirable for an Exchanger to accept payment from the Relinquished Property purchaser in the form of cash and a promissory note.
Exchanges between related parties are allowed but the Exchanger must follow specific rules for the exchange to qualify for tax deferral.
Refinancing to pull equity out of a property prior to or after completing a tax deferred exchange can result in a taxable transaction under the “step transaction doctrine.”
The intent by the taxpayer to hold property “primarily for sale” will prevent the property from qualifying for IRC §1031 treatment.
Can I dissolve my entity right before the close of escrow?
Certain interests in real property, such as natural gas pipelines, may be exchangeable for a fee interest in real property.
Because of advantageous tax treatment combined with liability protection, limited liability companies (LLCs) have become a preferred way to own real estate in the United States.
The 1991 Treasury Regulations for tax deferred exchanges under IRC §1031 established four “safe harbors,” the use of which allow a taxpayer (Exchanger) to avoid actual or constructive receipt of money or other property for purposes of completing a §1031 exchange.
Depreciation is an integral part of calculating the adjusted basis of property, and thus is an important component of the non-recognition provisions of IRC §1031.
Exchangers may freely exchange properties throughout the United States, trading property in one state for replacement property in another state.
An Exchanger should always consult with competent independent legal and/or tax advisors to determine the applicability of any IRC §1031 tax deferred exchange benefits.
It has been established that vacation or second homes held by the Exchanger primarily for personal use do not qualify for tax deferred exchange treatment under IRC §1031.
IRC §1031 permits the deferral of capital gains tax on investment or business use property that is exchanged for like-kind investment or business use property of equal or greater value.
Rev. Proc. 2007-56 permits extension of IRC §1031 exchange deadlines upon issuance of an IRS Notice or other guidance permitting relief to taxpayers due to Federally declared disasters.
The Foreign Investment in Real Property Transfer Act (IRC §1445 & Treasury Regulations §1.1445), more commonly known as “FIRPTA” is a federal law that requires withholding on dispositions of U.S. real estate by “foreign persons,” defined as a nonresident alien individual, a foreign corporation that does not have a valid election under section 897(i) to be treated as a domestic corporation, a foreign partnership, a foreign trust, or a foreign estate.