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Posted by L K Williams on February 22, 2007, 2:08 am
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> Would this transaction qualify as a like kind exchange? If
> not, what part or parts of the transaction disqualifies it.
>
> TP owns land out of state, which he purchased 5 years ago
> while a resident of that state. Land is held for
> investment.
>
> TP purchases land in March 2006 in current state of
> residence, borrowing funds from a bank in order to purchase.
>
> TP sells out of state land in October '06 and uses proceeds
> to pay off mortgage. TP asserts this is a like kind
> exchange since both pieces of land are held for investment.
There are several requirements of section 1031 exchanges
that TP failed to comply with.
To begin with, the proceeds from the original sale must be
held by a qualified intermediary. Under section 1031, the
selled cannot receive ANY proceeds before certain other
conditions are met.
Second, the intermediary must be the party purchasing the
replacement property.
Third, section 1031 has certain time requirements for
identifying and closing on the replacement property. TP has
not complied with these requirements.
So, no, this is NOT a like kind exchange and he must report
the sale and pay any tax due on the gain.
Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
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