What the deferred exchange regulations forgot to tell you

Article Abstract:

IRC section 1031(a)(3) imposes a 45-day limit for the identification of replacement property in a deferred real estate exchange that must be complied with carefully. The count starts on the day after the first transaction, falls on the 45th day regardless of whether it is a non-business day and the IRS does not grant extensions even in cases such as the Los Angeles riots. Taxpayers can identify three properties, properties valued at less than 200% of the exchange or as many properties acquirable at 95% of fair market value in 180-days. Identification should be in writing and signed by the taxpayer.

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What the deferred exchange regulations forgot to tell you - what is a prohibited basis-shifting transaction?

Article Abstract:

Taxpayers hoping to reduce taxes on real estate by using basis-shifting transactions should know that Section 1031(f) enacted by the Revenue Reconciliation Act of 1989 restricts these transactions among relatives. Basis-shifting transactions involve the tax-free exchange of low- and high-basis properties followed by the sale of the low-basis property. Section 1031(f) subjected such transactions to taxation when they occur among related persons. However, Section 1031(f) established some exceptions to the related person rule such as the death of one party to the exchange within two years.

Taxation, Real estate, Real property, Basis (Taxation), Related party transactions

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What the deferred exchange regulations forgot to tell you: Congress forgot to repeal the "at-risk" rules of Section 465

Article Abstract:

The proper application of IRC Section 465 at-risk and recapture rules to real property exchanges is unclear. Guidance is needed on at-risk issues such as exchanges that cross taxable years, replacement property and newly acquired property debt, and aggregation of relinquished and replacement property into a single activity. Tax advisers should be aware of the potential tax implications of real estate exchanges due to the at-risk rules.

United States, Tax-free exchanges

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