Avoiding Boot “Boot” in the context of a 1031 exchange refers to items of non “like-kind” property acquired as part of the exchange. While the receipt of boot does not disqualify the entire exchange, the fair market value of boot received in an exchange may be subject to tax. Common examples of boot [...]
Vesting issues To qualify as an exchange under IRC Section 1031 title to the replacement property must be held by the same taxpayer as title to the relinquished property. Therefore, the entity beginning the exchange must be the entity concluding the exchange. The Qualified Intermediary will prepare the exchange documents to reflect the [...]
The impact of depreciation recapture on exchanges 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. The calculation of gain from the sale or exchange of an asset is based in part on the depreciation calculation associated [...]
Disaster Relief Extensions for Exchange DeadlinesRevenue Procedure 2005-27 provides for the extension of tax deferred exchange deadlines when the IRS issues a Notice or other form of guidance permitting relief to taxpayers in those regions that are declared disaster areas by the President. The deadlines for the 45-day identification period, the 180day exchange period, [...]
Steps to Initiate an Exchange with IES A 1031 Exchange must be set up prior to the closing on the Relinquished Property. Once the Exchange Proceeds from the sale of the Relinquished Property are received by the Investor, the sale will be subject to tax. The Exchange Proceeds must be transferred directly to [...]
Time Periods There are two critical time periods with respect to an exchange under Internal Revenue Code Section 1031. The first is that the Investor must identify the Replacement Property to be received in the exchange within 45 days following the sale of the Relinquished Property. The second is that the Investor must [...]
Exchange Requirements The following requirements must be met to effectuate a tax-free exchange: Exchange must involve qualified property, either real or personal. Qualified property is property that is either held for investment or for use in a trade or business. Qualified property does not include real property used exclusively as a principal residence [...]
Glossary of terms Boot Any property received in an exchange that is not considered "like-kind" to the property sold. This amount may be subject to tax. Delayed Exchange Exchange where Relinquished Property is sold to one party followed by the purchase of Replacement Property from a different party within the 180-day exchange period. [...]
What is a Tax-Free Exchange? A "1031 exchange" or "tax-free exchange" is an exchange of real or personal property structured under Section 1031 of the Internal Revenue Code that allows owners of investment property or property held for productive use in a trade or business to defer the recognition of capital gains taxes [...]
Get Social