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Posted by Dick Adams on September 18, 2008, 8:52 am
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On a 1031 Exchange where a property is sold and the
proceeds are invested in another property, am I
correct that the acquired propery must be of equal
or greater value of the property sold?
Example:
Property A is sold for $X (net of selling costs)
and its mortgage of $Y was paid off. Therefore,
as long as Property B must cost $X or more for
the transaction to be completely tax exempt?
Dick
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Posted by Bill Brown on September 18, 2008, 9:44 am
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On Sep 18, 8:52 am, rdad...@panix.com (Dick Adams) wrote:
> On a 1031 Exchange where a property is sold and the
> proceeds are invested in another property, am I
> correct that the acquired propery must be of equal
> or greater value of the property sold?
>
Keeping in mind that the taxpayer cannot touch the sales proceeds (an
intermediary must be used), to defer all the gain on the property
given up, the acquisition cost of the new property must equal or
exceed the sales proceeds of the old property.
> Example:
> Property A is sold for $X (net of selling costs)
> and its mortgage of $Y was paid off. Therefore,
> as long as Property B must cost $X or more for
> the transaction to be completely tax exempt?
If $Y is a part of $X, yes. (If $Y is in addition to $X, then the new
property must cost $X + $Y for all the gain to be deferred.)
Regards,
Bill
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Dick Adams on September 18, 2008, 6:46 pm
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> rdad...@panix.com (Dick Adams) wrote:
>> On a 1031 Exchange where a property is sold and the
>> proceeds are invested in another property, am I
>> correct that the acquired propery must be of equal
>> or greater value of the property sold?
> Keeping in mind that the taxpayer cannot touch the
> sales proceeds (an intermediary must be used), to
> defer all the gain on the property given up, the
> acquisition cost of the new property must equal or
> exceed the sales proceeds of the old property.
Thanks, Bill. That is what I thought.
Are there specific qualifications for who can be the
intermediary?
Dick
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Gil Faver on September 18, 2008, 8:06 pm
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> Are there specific qualifications for who can be the
> intermediary?
>
I was under the impression that pretty much anyone could serve as the
Qualified Intermediary, but you would want someone who could make sure all
the paperwork is done right. So maybe your buddy is not the best choice.
In addition to the standard (and not to be trivialized) "make sure they have
lots of experience" and "make sure they are bonded and/or insured", I noted
these limitations, which sort of surprised me:
from http://en.wikipedia.org/wiki/Qualified_Intermediary
Anyone who is related to the taxpayer, or who has had a financial
relationship with them within the two years prior to the close of escrow of
the exchange can not be used as the QI. This means that the taxpayer cannot
use their current attorney, certified public accountant or real estate
agent. A corporation or other entity to act as Qualified Intermediary owned
by your CPA, CPA firm, real estate agent or attorney is likewise
disqualified.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Bill Brown on September 19, 2008, 10:26 am
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On Sep 18, 6:46 pm, rdad...@panix.com (Dick Adams) wrote:
>
> > rdad...@panix.com (Dick Adams) wrote:
> >> On a 1031 Exchange where a property is sold and the
> >> proceeds are invested in another property, am I
> >> correct that the acquired propery must be of equal
> >> or greater value of the property sold?
> > Keeping in mind that the taxpayer cannot touch the
> > sales proceeds (an intermediary must be used), to
> > defer all the gain on the property given up, the
> > acquisition cost of the new property must equal or
> > exceed the sales proceeds of the old property.
>
> Thanks, Bill. That is what I thought.
>
> Are there specific qualifications for who can be the
> intermediary?
>
The intermediary can have no other business relationship with the
taxpayer. That omits the taxpayer's accountant, banker, insurance
agent, etc. There are firms that exist to serve as accomodaters on
1031 exchanges.
Regards,
Bill
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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