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Like kind exchange - my brain has collapsed


jasdlm
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Client owns rentals.  Is a contractor and also flips houses, so schedule E and schedule C.  He bought and sold a house in 2020 (flipped) except he took a small portion of the proceeds and did a like-kind exchange into another rental.  I'm shutting down trying to think about this.  The $25k would have been subject to SE tax, so I can avoid that with a 1031?  I'm having trouble wrapping my mind around how to report this.  How do I get income off schedule C and over to the fixed asset schedule?

If I'm asking a ridiculous question, go ahead and chew me out, but please help me.

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I certainly won't chew you out and am interested in learned responses.  Neurosurgeon client decided early 2020 to form LLC for 'real estate investment and creative services.'  She has now a rental property and lots of other 'business' expenses not really related to the rental but no business activity.  How does an LLC have both Sch. C and Sch. E?  Is your client an LLC or just sole prop.? 

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Based on the information you have provided, there was no 1031 exchange.  1031 exchanges involving the sale of the old property and the purchase of the replacement property have to be handled thru a Qualified Intermediary usually involving investment real property.

There is no after the fact magic you can perform to address this situation.

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cbslee is correct.

Keep in mind that even if there was a valid 1031 exchange that was properly set up and executed, there wasn't though, the fact that he took money from it would make at least that much taxable and indicates that not enough was spent on the new replacement property for the transaction to be totally free of tax.

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I dunno about CBS this time, folks.  An intermediary is not required, if traded property is actually identified and actually traded.  Most LKE using an intermediary is a paper shuffle, and the intermediary is paid for his services.

There may be a disallowance based on Inventory and new Rental Property not being like-kind under the new definition (2018).

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Just now, Corduroy Frog said:

I dunno about CBS this time, folks.  An intermediary is not required, if traded property is actually identified and actually traded.  Most LKE using an intermediary is a paper shuffle, and the intermediary is paid for his services.

There may be a disallowance based on Inventory and new Rental Property not being like-kind under the new definition (2018).  But to the extend Cash or debt transfer exists, the normal rules apply.

Sorry, folks.  don't know how to delete or rewrite.  I don't even know how to spell I.T.

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