IRS Code 1031- No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment
A few bullet points are as follows:
- 45 Day identification period- The tax payer must identify potential replacement property(s) by midnight of the 45th day from the date of sale
- 180 Day exchange period- The taxpayer must acquire the replacement property by midnight of the 180th day, or the date the taxpayer must file its tax return (including extensions) for the year of the transfer of the relinquished property, whichever is earlier
- Reverse exchange is when you purchase a property prior to selling the other property. Same deadlines apply as above
- If you sell a home that you have not lived in 2 of the last 5 years you could be subject to capitol gains tax on the gain for the sale
- Those “2 years” don’t have to be the last 2 years and they don’t have to be a continuous 2 years
- Gain= what you paid for the home + improvements to the home subtracted from what you sold the home for
Make sure to consult with an attorney and/or your tax advisor for strategies and more information on this program to see if it fits your needs.
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