Taxpayers should be wary of individuals promoting improper use of like-kind exchanges. Typically they are not tax professionals. Sales pitches may encourage taxpayers to exchange non-qualifying vacation or second homes. Many promoters of like-kind exchanges refer to them as “tax-free” exchanges not “tax-deferred” exchanges. Taxpayers may also be advised to [...]
You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred. Form 8824 asks for: Descriptions of the properties exchanged Dates that properties were identified and transferred Any relationship between the parties to [...]
LTV is Loan To Value – which means the amount of loan associated with the property. If a property is 50% loan to value (also called 50% leveraged) this means there is a 50% cash down payment and a 50% loan associated with the property. DST loans are non-recourse which [...]
It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable. If cash or other proceeds that are not like-kind property are received at the conclusion of the [...]
While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters. The first limit is that [...]
Both the relinquished property you sell and the replacement property you buy must meet certain requirements. Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not [...]
To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another. Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more [...]
Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.
Basis from the relinquished (sold) property to the replacement (new) property must be carefully tracked and calculated by your tax professional to ensure a successful 1031 exchange. In 1031 exchange your gain is deferred until a sale occurs or there is a step up in basis. A very simple basis [...]
