Section 1031(a) provides that when "like-kind" property is exchanged
at a gain, any tax due on the exchange is deferred until such point as
the replacement property is sold or exchanged for non like-kind property.
We can help. Fortunately, the law allows for non simultaneous like-kind exchanges. If the transaction is properly structured, it is possible to "sell" the exchange property for cash proceeds and if replacement property is specifically identified within 45 days and "purchased" within 180 days, the entire transaction qualifies. But, it gets even better. You can first "purchase" the replacement property and then "sell" the exchange property at a future date in a so called Reverse Starker transaction.
These types of transactions take a little planning and structuring. If you the taxpayer actually receive and have dominion and control over the cash proceeds, the deal is off and you pay the tax. However, if you utilize the services of a "qualified intermediary" to hold the cash and in many cases actually purchase the replacement property, the transaction will qualify.
At Dana S. Beane & Company, P.C., we think Section 1031 is a home run. Working with one of our clients, we were able to structure a transaction which saved thousands of dollars in current tax on a non simultaneous exchange of real property.
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