Tax Lawyers Exchange

Example of a 1031 exchange

dfarrow09 — Mon, 02 Feb 2009 04:23:50 +0000

Robert decides to sell a warehouse that he has owned as an investment property for 5 years. He originally purchased the warehouse for $140,000, and it is now worth $750,000. His real estate broker has recommended that he engage Tax Lawyers Exchange to act as his Qualified Intermediary in a tax deferred exchange. This will defer payment of capital gains taxes. The real estate broker finds Robert an office building valued at $2,000,000 for his replacement property. Robert is successful in the purchase and exchange process and as a result does not have to pay capital gains taxes.

The Identification Period

dfarrow09 — Sun, 18 Jan 2009 04:46:10 +0000

An investor has exactly 45 days from the day of selling a relinquished property to identify a like-kind replacement property (or properties) that he proposes to purchase. There are no exceptions to the 45 day timeline. No extensions are granted, even if the 45^th day falls on the weekend or a legal U.S. holiday. The properties must be identified to a Qualified Intermediary (Accommodator) no later than midnight of the 45^th day. For example, if the sale of your relinquished property closed on March 31^st, the first day of your 45 calendar day identification period would be April 1^st and the 45^th calendar day deadline would be May 14^th.

Simultaneous Exchange

dfarrow09 — Sun, 18 Jan 2009 03:59:40 +0000

A Simultaneous Exchange occurs when two properties are exchanged simultaneously. This can happen when two properties are swapped, property for property, which is called a two-party exchange. This can also happen when a property is sold and the replacement property is purchased simultaneously. To ensure safe harbor protection, a Qualified Intermediary should facilitate the exchange.