Jump to content
ATX Community

like kind exchange


Marie

Recommended Posts

Having trouble with the form.  I'm selling acres for 190,000 and buying acres for 175,000  My cost in the initial acreage is 100,000.  So my gain would be 90,000 but because i am not putting all into the new acreage, I think I have a $15,000 taxable gain.  Can't seem to work that out on the form.  Are my figures correct and anyone have any forms or suggestions I can use?

Link to comment
Share on other sites

49 minutes ago, Marie said:

having trouble with section 3 in the input of the form on ATX. 

Yes, I agree that the taxable gain is $15. That is what your client ended up with in cash from the intermediary after purchasing the replacement property. 

The way I see it - here's what I think should be on these lines. You said it's acreage so these #s assume nothing else on this property and the transaction that would have any ordinary income recapture on line 21. Sorry, I can't help with ATX input.

  • line 15 - $15
  • 16 - $175
  • 17 - $190
  • 18 - $100
  • 19 - $90
  • 20, 22 & 23 - $15
  • 24 - $75
  • 25 - $100

Basically since the full gain is $90 and client is paying tax on the $15 the $75 is deferred. Basis in the new is $100 and if sold tomorrow for its $175 FMV, the remaining gain (now deferred) of $75 would be taxable. Hope that makes more sense of it.

  • Like 1
Link to comment
Share on other sites

51 minutes ago, Roberts said:

I've never done one of these but have had clients inquire about it. Do all your clients use an outside intermediary to handle the transactions?

Whenever someone asks about it - that's the route I tell them to go and I never hear from them again about it.

From this IRS page:

Quote

Are there restrictions for deferred and reverse exchanges?

It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange.  Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.

Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer.  These situations have resulted in taxpayers not meeting the strict timelines set for a deferred or reverse exchange, thereby disqualifying the transaction from Section 1031 deferral of gain.  The gain may be taxable in the current year while any losses the taxpayer suffered would be considered under separate code sections.

 

  • Like 1
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...