Saturday, April 6, 2013

If you sell property, and buy more property quick enough, you're off the hook


A 1031 exchange allows a property seller to purchase new real estate with the funds gained from the sale. This rolls over the gain into a different property. A person has 45 days to identify a replacement property following the closing of the sale on the originally owned real estate. After that, he has another 135 days to close the purchase of the replacement property. An individual usually needs to gather advice about a tax-deferred exchange soon after signing an offer to sell. He only has a total of 180 days after the sale closes to complete his tax-deferred exchange. Therefore, jobs for Enrolled Agents involving Section 1031 must move quickly in assuring taxpayer compliance with all of the requirements.

The taxpayer must reinvest the entire net sales proceeds of the sold property in the purchase of a new property. For example, a building sold for $1,600,000 with selling costs of $100,000 and debt repayment of $900,000 leaves the seller with $600,000 of cash. The replacement property must have a cost of at least $1,500,000. The other factor is that the new purchase must entail at least $600,000 of cash.

http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031

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