![]() ![]() Finally, payment of certain costs related to the transfer of the relinquished property which may be characterized as selling expenses or exchange expenses are excluded from the seller’s amount realized and ignored altogether. In other cases, payment of an expense related to the disposition of relinquished property or acquisition of replacement property may give rise to taxable boot in the exchange, but would not create a constructive receipt problem. Under the foregoing rules, the use of exchange funds to pay expenses not related to the exchange could invalidate the exchange to the extent that such use results in the taxpayer’s constructive receipt of exchange proceeds. ![]() Any non like-kind property received by the taxpayer in the exchange, usually referred to as boot, will cause the taxpayer to recognize gain. In addition, the taxpayer must not have a direct or indirect right to receive or otherwise obtain the benefit of the exchange proceeds during the exchange period except to acquire like-kind replacement property. In order to obtain complete deferral of capital gain taxes in an exchange otherwise meeting the requirements of Internal Revenue Code Section 1031, a taxpayer is generally required to reinvest all net sale proceeds generated by the sale of relinquished property in like-kind replacement property within the applicable exchange period (a maximum 180 calendar days). What to do about Exchange Expenses in an Exchange.1.1031(k) Treatment of Deferred Exchanges.Replacement Property Identification Form.What’s the First Step in a 1031 Exchange?. ![]()
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