What Real Estate 1031 Exchange Rules Must I Follow?
Rule 1: Like-Kind
Property
To qualify as a 1031 exchange, the property being sold and the property being acquired must
be “like-kind.
Rule 2: Investment or Business
Property Only
A 1031 exchange is
only applicable for Investment or business property, not personal property. In
other words, you can’t swap one primary residence for another.
Rule 3: Greater or Equal Value
In order to completely avoid paying any taxes upon the sale of
your property, the IRS requires the net market value and equity of the property
purchased must be the same as, or greater than the property sold.
Rule 4: Must Not Receive “Boot”
A Taxpayer Must Not Receive “Boot” in order for the exchange to
be completely tax-free. Any boot received is
taxable to the extent of gain realized on the exchange.
Rule 5: Same Tax Payer
The tax return, and name appearing on the title of the property
being sold, must be the same as the tax return and title holder that buys the
new property.
Rule 6: 45 Day Identification
Window
The property owner has 45 calendar days, post-closing of the
first property, to identify up to three potential properties of like-kind.
Rule 7: 180 Day Purchase Window
It’s necessary that the replacement property be received and the
exchange completed no later than 180 days after the sale of the exchanged
property OR the due date of the income tax return (with extensions) for the tax
year in which the relinquished property was sold, whichever is earlier.
Comments
Post a Comment