Sale of Property- 1031

[barosser]

TP has offer to sale land he uses as a hay field, he has cattle on a different piece of property. to deferr the gain he must within 180 day purchase like kind property and not receive the funds from the sale. The funds have to kept in escrow by a third party.

If property not located within the 180 days then considered a sale and taxed accodingly

Anything else I am missing.

No relation between seller and purchaser

thanks in advance

[jainen]

>>If property not located within the 180 days<<

There are several things wrong with your description. A 1031 exchange must be a true trade, not simply a sale with funds held in escrow. Typically a qualified intermediary acts as the trading partner.

The replacement property must be identified within 45 days, not 180 days. The longer period is only to complete the acquisition, not to locate it.

It is not clear from your post that the hayfield is business or investment property, which is a requirement for the replacement property as well.

[barosser]

Yes the field is used for hay production in his farm, carried on his schedule F. He wishes to locate property closer to his larger ranch about 30 miles away. He has an offer for the 20 acres but wishes only to purchase other property. I see that he has only 45 days to locate the property but 180 to complete the purchase. Can the purchase of property be from a releated person? The sale of the original is not to a releated person. He has not identified the property yet and he might not be able to locate anything for sale in that short period of time. Is there anything else that he can do to delay the tax on the sale of the property??

[jainen]

>>Is there anything else that he can do to delay the tax on the sale of the property??<<

Since he is not ready to acquire replacement property, he doesn't need the money yet. He could lease the field, or option it in some way, or trade it for a triple-net (that is, don't call me for anything except the rent payment) on commercial property in town which he can later exchange for something else, or he do an installment sale, or if the buyer is really motivated he can charge 15% more and just pay the tax.

[SCL]

Yes the field is used for hay production in his farm, carried on his schedule F. He wishes to locate property closer to his larger ranch about 30 miles away. He has an offer for the 20 acres but wishes only to purchase other property. I see that he has only 45 days to locate the property but 180 to complete the purchase. Can the purchase of property be from a releated person? The sale of the original is not to a releated person. He has not identified the property yet and he might not be able to locate anything for sale in that short period of time. Is there anything else that he can do to delay the tax on the sale of the property??

unless it is a direct exchange of prop A for prop B, a qual intermediary must broker the third party exchange. otherwise his sale of the first property is a recognized taxable event - regardless of your concern about the 45 or 180 day requirements. i am not sure about your related party question, but as much as i understand this situation, i don't think you are on a 1031 tax free exchange path.

[jainen]

>>a qual intermediary must broker the third party exchange<<

There is absolutely no requirement in the code or the regs to use a qualified intermediary. It is simply one of several safe harbors, popular and convenient, but by no means the ONLY valid way to do a multi-leg exchange.

[SCL]

>>a qual intermediary must broker the third party exchange<<

There is absolutely no requirement in the code or the regs to use a qualified intermediary. It is simply one of several safe harbors, popular and convenient, but by no means the ONLY valid way to do a multi-leg exchange.

fair enough. i was only suggesting that this situation did not appear to me to be on the road to a 'valid .. multi-leg exchange'.