Tropical Properties Realty                   

Buying, Selling & Investment     
1031 Exchange
 
 
What requirements are needed for IRC 1031 tax-deferred exchange
 
 

 

 

 

 

IRC 1031 Guidelines:

 

  •     Like Kind Property

Sales proceeds from the relinquished property must be reinvested into a replacement property or properties of equal or greater value. Seller may opt for one of three identification strategies:

 

IRS Definition Of Like Kind

Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.

Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.

Like-Kind Property

Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.

Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties



3 Property Rule  The Seller may identify up to (3) properties totaling the equal or greater value of the relinquished property.

200% Rule  The Seller may identify any number of properties as long as the fair market value of the replacement properties does not exceed 200% of the fair market value of the relinquished property.

95% Rule  The Seller may identify any number of properties as long as the seller closes on at least 95% of the identified properties before the end of the 180-day exchange period.



 

   •   45-Day Identification Period 

Seller  must  identify  replacement properties within
45 days from the date the relinquished property was
transferred.


 

Disclaimer
The information on this website is for discussion and information purposes only. It is not intended to replace competent legal, tax or financial planning advice. The applicable tax codes apply to and relate to federal law only. Individual states may have their own additional tax codes. Please contact the appropriate tax and legal professional in your state. This information is provided from sources believed to be reliable but should be used in conjunction with professional advice that is consistent with your personal situation.