Tag Archives: Time Limit

1031 Exchange Property Criteria

ed | July 14, 2011 - 10:13 am

For the entire 20+ years we have been in the exchange business there is always a question being asked as to what the criteria is to do a 1031 exchange. One of the incorrect myths is that the replacement property must currently be a rental to be a valid exchange.

In our book we have carefully written out the correct criteria for a qualifying like-kind property.  It reads:
“ Criteria for a Tax Deferred Exchange. In addition to the IRS regulation, the IRC Section 1031 spells out criteria to be met for the real estate to be like-kind. Basically these are:
Both properties must be in the United States.

For the Relinquished Property(ies) the property currently must be used by the exchanger for investment, business or production of income.
It is not important how the buyer plans to use the property!!

For the Replacement Property(ies) the exchanger must hold the new property for investment, business and/or production of income.
It is not important how the property is currently being used by the seller!!

The property must be identified in 45 days.

The property must be settled in 180 days (or the tax due date, including extension, if earlier).

It is not important that the purchaser buying the investor’s property plans to use it as a personal residence; or that the property the exchanger acquires be currently used as a personal residence, an investment or business property. The property to be acquired can be currently used in any status – business, investment, dealer or personal. The status of the currently owned property and the use the exchanger will make of the acquired replacement property is what is important!”

Quoted from our Book “HOW TO DO A LIKE KIND EXCHANGE OF REAL ESTATE –Using a Qualified Intermediary”
http://www.1031.us/Book/book.htm

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Do You Need to File an On-Time Extension?

admin | January 12, 2011 - 3:44 pm

The IRS 1031 regulations say:   “The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer’s return of the tax imposed by chapter 1 of subtitle A of the Code for the taxable year in which the transfer of the relinquished property occurs.” (§ 1.1031(k)-1(B)(2)(ii)).

If you closed on a relinquished property after October 19, 2010, and will not receive your replacement property until after the 2010 income tax filing due date (April 18, 2011, for individuals), you must file an on-time extension for the filing of your 2010 federal tax return to get the full 180 days to complete the exchange. Taxpayers use IRS Form 4868 to file for an automatic six-month extension. If you closed on your relinquished property anytime in 2010, you must report the completed exchange on IRS Form 8824, Like-Kind Exchange, as part of your 2010 federal tax return. You may not file your tax return for 2010 until the exchange is completed.

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