Client came in and told me of exchange made in Oct 2011 - traded his lake lot for a building and land. His basis in lot was $78000. The agreed upon exchange value was $85000. Are there tax consequences? I have no experience with this and would appreciate some insight. He does intend to use the building for rental storage eventually.
-
-
In looking at TTB pages 6-16 & 6-17, it seems that there are some very specific rules that must be followed. In addition, it appears that a "Qualified Intermediary" must be used. I know that in past discussions on this board, I have gotten this same impression.
LTOnly in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut". -
He cannot just sell one property and buy another one and call it a like-kind exchange. The money must NOT pass through his hands. It goes to the Q-I at sale and the Q-I purchases the new property meeting all the time requirements, etc. etc. If this did not happen, and he received the sales proceeds, he has a sale and a reportable gain/loss on 2011 tax return. If it was a qualified like-kind exchange, there will be paperwork to show that. Was it an actual bona-fide "trade" where he took the other property and the other owner took his? This is rare, but it happens.Last edited by Burke; 03-20-2012, 05:07 PM.Comment
-
Not enough details here
but a simultaneous exchange would qualify.Comment
-
What else should I be asking? Client will be in later today. All I know is that an attorney handled the transaction. Client did not receive funds at all. Monies were sent directly to bank to pay off mortgage.Comment
-
The paperwork should show what it was. If it qualifies as a like-kind exchange, you complete Form 8824. Simply put, the gain he would have claimed on his tax return is carried over and reduces the basis of the new property. It is called deferred gain and will come into play when he sells or disposes of the new property. There are books written on these transactions; hopefully, the lawyer jumped through all the hoops for eligibility. You just have to do the form. If there was "boot" involved, it can get complicated. Good luck.Last edited by Burke; 03-21-2012, 06:47 PM.Comment
-
Sec 1031
Read Code Sec 1031 and applicable Regs.........Find out for yourself. Code Sec 1031 is quite complicated and requires much advance planning and execution at the time of the exchange. Trying to do it after the fact is a crapshoot at best...........Good luck.........Also read up on the concept of constructive receipt.Originally posted by dktax View PostLast edited by jimmcg; 03-22-2012, 08:43 AM.Comment
Comment