A reverse exchange is closing on the purchase of the replacement property before closing on the sale of the relinquished property. Many investors utilize a reverse exchange to immediately acquire a desirable replacement property in a seller’s market where there may be competing offers or there is a pressing need to close quickly. Other investors [...]
A delayed exchange happens when the taxpayer closes on the sale of their relinquished property on one date and then acquires a replacement property from a seller at a later date. A taxpayer has a maximum of 180 calendar days, or their tax filing date, whichever is earlier, to complete their exchange. This is called [...]
There are three steps involved in determining the capital gain taxes that are owed. The first is to determine the net adjusted basis – this is calculated by starting with the original purchase price, adding the capital improvements and subtracting the depreciation taken. The second step is calculating the actual capital gain by taking today’s [...]
For full tax deferral, a taxpayer must reinvest all of the new proceeds in “like-kind” replacement property and have the same or greater amount of debt on the replacement property or properties. Another way of looking at this is to purchase replacement property of equal or greater value and reinvest all of the net equity. [...]
Although a taxpayer can identify more than one replacement property, the maximum number of properties that can be identified is limited to one of the following three rules: 1) Three replacement properties without regard to their fair market value (the “3 Property Rule”); 2) The value does not exceed 200% of the aggregate fair value [...]
Every taxpayer should always review all aspects of their specific facts and circumstances with their own tax and/or legal advisors. Although a qualified intermediary cannot provide specific legal or tax advice, feel free to contact Asset Preservation, Inc. for a complimentary consultation by email or by calling 800-282-1031.
Yes, a taxpayer can do a partial exchange and not reinvest all of the net equity or take on debt in the replacement property – the property being acquired - that less than the debt in the relinquished property – the property being disposed of. The taxpayer must recognize as income the exchange proceeds received [...]
No, an LLC member interest, where the LLC elects to be treated as a partnership, or partnership interest is considered personal property and cannot be exchanged. IRC Section 1031(a)(2)(D) specifically prohibits the exchange of partnership interests. However, both an LLC or partnership (or any other entity for that matter) can do a 1031 exchange on [...]
A tenant-in-common ownership program, often referred to as a “TIC”, is where a taxpayer acquires fractional ownership in a larger commercial property with up to 35 other co-owners. There are many benefits to TIC ownership including professional property management, geographic diversification, appreciation, predictable cash flow, depreciation and flexibility without management problems. A properly structured TIC [...]
The central issue is whether or not the investor has the intent to “hold for investment”, not just the period of time. There is no “safe” holding period to automatically qualify as being held for investment. Time is only one of the factors the IRS can look at to determine the taxpayer’s intent for both [...]
