|
Author: Neda Dabestani-Ryba Article source: http://www.edmondoklahomarelocation.com/. Used with author's permission.
Following is a reproduction of the IRS's rules and requirements for 1031 tax deferred exchanges with regards to real property. If you have any questions regarding the sale of your real property or questions about what qualifies for a 1031 exchange or not, please consult your tax professional.
Sec. 1031. - Exchange of property held for productive use or investment
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
(2) Exception
This subsection shall not apply to any exchange of -
(A)
stock in trade or other property held primarily for sale,
(B)
stocks, bonds, or notes,
(C)
other securities or evidences of indebtedness or interest,
(D)
interests in a partnership,
(E)
certificates of trust or beneficial interests, or
(F)
choses in action.
For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.
(3)
Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if -
(A)
such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
(B)
such property is received after the earlier of -
(i)
the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
(ii)
the due date (determined with regard to extension) for the transferor's return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs.
(b)
Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section, section 1035(a), section 1036(a), or section 1037(a), then the basis shall be the same as that of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange. If the property so acquired consisted in part of the type of property permitted by this section, section 1035(a), section 1036(a), or section 1037(a), to be received without the recognition of gain or loss, and in part of other property, the basis provided in this subsection shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such other property an amount equivalent to its fair market value at the date of the exchange. For purposes of this section, section 1035(a), and section 1036(a), where as part of the consideration to the taxpayer another party to the exchange assumed (as determined under section 357(d)) a liability of the taxpayer, such assumption shall be considered as money received by the taxpayer on the exchange.
(e)
Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not property of a like kind.
(f)
Special rules for exchanges between related persons
(1)
In general
If -
(A)
a taxpayer exchanges property with a related person,
(B)
there is nonrecognition of gain or loss to the taxpayer under this section with respect to the exchange of such property (determined without regard to this subsection), and
(C)
before the date 2 years after the date of the last transfer which was part of such exchange -
(i)
the related person disposes of such property, or
(ii)
the taxpayer disposes of the property received in the exchange from the related person which was of like kind to the property transferred by the taxpayer, there shall be no nonrecognition of gain or loss under this section to the taxpayer with respect to such exchange; except that any gain or loss recognized by the taxpayer by reason of this subsection shall be taken into account as of the date on which the disposition referred to in subparagraph (C) occurs.
(2)
Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account any disposition -
(A)
after the earlier of the death of the taxpayer or the death of the related person,
(B)
in a compulsory or involuntary conversion (within the meaning of section 1033) if the exchange occurred before the threat or imminence of such conversion, or
(C)
with respect to which it is established to the satisfaction of the Secretary that neither the exchange nor such disposition had as one of its principal purposes the avoidance of Federal income tax.
(3)
Related person
For purposes of this subsection, the term ''related person'' means any person bearing a relationship to the taxpayer described in section 267(b) or 707(b)(1).
(4)
Treatment of certain transactions
This section shall not apply to any exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection.
(g)
Special rule where substantial diminution of risk
(1)
In general
If paragraph (2) applies to any property for any period, the running of the period set forth in subsection (f)(1)(C) with respect to such property shall be suspended during such period.
(2)
Property to which subsection applies
This paragraph shall apply to any property for any period during which the holder's risk of loss with respect to the property is substantially diminished by -
(A)
the holding of a put with respect to such property,
(B)
the holding by another person of a right to acquire such property, or
(C)
a short sale or any other transaction.
(h)
Special rules for foreign real and personal property
For purposes of this section -
(1) Real property
Real property located in the United States and real property located outside the United States are not property of a like kind.
(2) Personal property
(A)
In general
Personal property used predominantly within the United States and personal property used predominantly outside the United States are not property of a like kind.
(B)
Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use of any property shall be determined based on - ''subparagraphs''.
(i)
in the case of the property relinquished in the exchange, the 2-year period ending on the date of such relinquishment, and
(ii)
in the case of the property acquired in the exchange, the 2-year period beginning on the date of such acquisition.
(C)
Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection -
(i)
only the periods the property was held by the person relinquishing the property (or any related person) shall be taken into account under subparagraph (B)(i), and
(ii)
only the periods the property was held by the person acquiring the property (or any related person) shall be taken into account under subparagraph (B)(ii).
(D)
Special rule for certain property
Property described in any subparagraph of section 168(g)(4) shall be treated as used predominantly in the United States Neda Dabestani-Ryba is a licensed Realtor in Maryland. She is a member of the President's Circle of Top Real Estate Professionals. She can be reached at (800) 536-3806 or visit her website for more information: http://neda.dabestani.pcragent.com/
Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.
Are You Fully Present in Your Marriage?
When a spouse is physically present but mentally "out to lunch," the partner will feel the difference. In a marriage, intimacy is enhanced by feelings of connec...
Is Natural Weight Loss Really Possible?
Not only is natural weight loss safe, but you'll eliminate food cravings without taking weight loss pills, and Natural weight loss is Permanent!
Viral Marketing with a Powerful Twist
What would you do with 500, 1000 or more additional visitors each day? Imagine how your web business will grow with an extra 2000, 5000 or MORE leads each month...
Be a Leader: Use Environmentally Friendly Products in Your Cleaning Business
Green cleaning is a hot topic these days due to health and safety concerns. People are becoming more environmentallly conscious and as a result want their jani...
Victorious Living
We have a choice in life. We can feel sorry for ourselves because we are not rich and loaded with talent,or we can step up to the plate and take our best shot. ...
Dating Advice: Should You Play With Madness?
Just what is "map/model" of the world, and how will this help your dating? It's simply how each individual human being views the world-the sum total of our int...
A Corporate Facelift With Sound Bytes
If Baby Boomers can get botox and tummy tucks, then why don't companies receive facelifts to improve their image as well? The telephone is the lifeblood of any ...
The ABCs of Raising Twins
As a mother of two sets of fraternal boy/girl twins, I am often asked, "How do you do it?" I do not have an answer. I am just a regular 27 year old who has ne...
Beyond Time Management – Seven Ways to Leverage Your Time for Greater Results
Most of us have a to-do list. While a to-do list is a valuable tool to help us stay on track for the urgent tasks of the day that isn't the focus of this artic...
Child Discipline - Be Consistent With Your Child
Are you complaining you can't control your child? Then be consistent. It works.
Powerful Ads and Website Material—Learn from the Best…and the Worst
How to develop powerful ads and websites. Learn from the best and the worst.
We must be able to identify the best ads and the worst and then learn how to copy t...
Top Ten Great Headline Ideas
What Makes a Great Headline? Headlines are far more important than the copy beneath them. If you don't use headlines within your chapter or in your Web site sal...
WebToors Guide To Success
There are over 700 million computers in use in the world at any given time. Earning income on the internet is the future for anyone who owns a computer and is ...
Which Way Are Mobile Phone Games Heading?
Which way are mobile phone games heading?
How To Have Optimal Health and Energy: Seven Key Steps
You can improve your overall health and energy levels. There are certain factors that are involved in moving toward improved health and energy...why not get st...
Successful Email Marketing
No doubt email is still the best way to get a quick response from your prospect. Big companies on the web have realized this that they have implemented free ema...
10 Tips to Planning Your Dream Road Trip
Many people dream of taking that long trip of a lifetime, but few actually make it happen. Where would your adventure take you? How would you "get it all toge...
Words That Can Leave You Powerless
No one comes to this world without a gift or special talent that is not unique to him/her alone. The gifts that we bring are the tools we will use to experience...
Snowboard Clothing
Snowboard clothing - when snow gets hot!
How To Become A Sales Superstar And Have Fun Winning More Business - Start Here!
...most sales people have "fallen into" sales. Very few actually choose. Lets take this back a step further and think about childhood because most of us had a g...
When Bad Things Happen (Part 2)
I have witnessed, and I am sure you have too, individuals crack under the strain of personal tragedy. We have all observed the aftermath of accidents and other ...
A Guide to Acrylic Kitchen Sinks
Unlike laminates, acrylic and/or polyester plastics are homogenous nonporous material. Kitchen sinks made from acrylic come in different thickness and numerous ...
Economists #2
Economists know more about how the fragments of society work than anyone. In school they are taught to break down the economy into its tiniest parts and to quan...
Trade Show Display Booth – A Marvelous Contact System
Trade show booths are one of the best direct contact systems with end consumers. The face to face meeting opportunity with customers can provide some excellent ...
|
Print this page