CODE SECTION 1031 TAX DEFERRED EXCHANGE ISSUES
Section 1031 of the Internal Revenue Code provides taxpayers the ability to transfer or exchange investment property for new property without incurring income tax on the gain. 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 exchange solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.
Requirements are:
1) There must be an exchange
2) Both the property being sold(“Relinquished Property”) and the property being acquired (“Replacement Property”) by the taxpayer must be held for productive use in a trade, or for investment
3) The Relinquished Property and the Replacement Property must be of like-kind.
Section 1031 does not apply to an exchange of any of the following:
1) Stocks-in-trade or other property held primarily for sale
2) Stocks, bonds, or notes
3) Other securities or evidence of indebtedness or interest
4) Interests in a partnership
5) Sale of primary residence
Section 1031 allows a taxpayer:
1) 45 calendar days after the date on which the taxpayer transfers the Relinquished Property to identify the replacement property.
2) To close the Replacement Property 180 days after the closing of the sale of the Relinquished Property.
These transfers or exchanges are complex. Please feel free to contact my office.