1031 Exchange legislation

Before the new tax law , if you had anything classified as property, you could exchange that property for property that was like-kin and avoid the. This means that like-kind exchange treatment is still alive and well for real property, but personal property will no longer qualify for a like-kind exchanges an therefore, will result in a taxable event. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange. Instant Downloa Mail Paper Copy or Hard Copy Delivery, Start and Order Now! Real Estate Exchanges.

The day identification and 1day exchange periods remain unchange as does the role of the Qualified Intermediary.

Providing Leadership. An exchange is a real estate transaction in which a taxpayer sells real estate held for investment or for use in a trade or business and uses the funds to acquire replacement property. Capital gains on the sale of this property are deferred or postponed as long as the IRS rules are meticulously followed. This like-kind exchange features real property of the same nature or character, regardless of grade or quality.

Section 202(c) was designed to provide relief to taxpayers through a deferral strategy, with the hopes that they would continue to reinvest. It allows an American taxpayer to exchange one investment property for another while deferring the tax consequence of the sale. Selling a farm or a ranch, like selling any business, often involves many different types of assets.

So, one of the major provision of law that was used by a taxpayer to save on capital gains tax requires fresh look and understanding.

Exchanges allow you to defer both the capital gains tax and depreciation recapture from the sale of a property and invest the proceeds into another “like-kind” property, often called “trading up. The person who sells the property must be the same person who buys the exchange property. The bill preserves like-kind exchanges of real property in its current form.

The treasury regulations specify that the person that acts as your qualified intermediary cannot be a disqualified person. However, if either party sells the property received in the original like-kind transaction during the two years after the exchange , the gain that was previously deferred must be recognized as of the date of the later disposition. The bad news is, the Tax Cuts and Jobs Act (TCJA) reduces the types of property eligible for this favorable tax treatment….

By retaining the ability to complete an exchange , recent tax reform legislation has allowed the commercial and investment real estate sector to continue to contribute to economic growth. But for this to work, the owner whose property you want to acquire will have to want to buy your property in exchange. This means that personal property is no longer eligible for a like kind exchange to defer the tax on the gain of the sale of personal property.

Not only would taxpayers have been impacted by this proposal, but it would have turned the real estate industry upside down. No gain or loss will be recognized. We recommend consulting a tax advisor about the specifics of reporting each exchange.

The taxpayer may also be required to report the exchange on their state tax return. If you completed more than one exchange , a different form must be completed for each exchange. Sadly, the new tax laws have effectively killed the collector car exchange. Virgin Islands are all listed as viable locations to carry out a U. However, Puerto Rico is not included on this list of coordinated territories.

Replacement property must be identified within days.

Any gain remaining after this step will still be tax-deferred. Another issue to consider is the basis of the replacement property. If the investor later sells the replacement property,. Internal Revenue Code permits a taxpayer to exchange assets which have been used productively in a business or held for investment for other like-kind business use or investment assets without recognizing the taxable gain on the sale of the old assets.

In some instances, a Qualified Opportunity Fund may be treated as a security, in which case all existing rules and regulations for securities apply.