#Irc 1031 code#

The only exception would be for a federally declared disaster and then only if the IRS notice specifically cites extensions to the 1031 exchange timelines which would include the 45-day identification period for the distinct federally declared disaster areas stated in the notice. To better understand the importance of the Section 1031 identification rules it is important to note that the 45-day identification period is set in stone there are no extensions. вЂњ3 Property RuleвЂќ: three replacement properties without regard to their fair market value вЂњ200% RuleвЂќ: any number of replacement properties so long as their aggregate fair market value of all replacement property does not exceed 200% of the aggregate fair market value of all relinquished properties or, the вЂњ95% RuleвЂќ: any number of replacement properties without regard to the combined fair market value, as long as the replacement properties acquired amount to at least ninety-five percent of the fair market value of all identified properties. Although taxpayers can identify more than one replacement property, they must adhere to one of the three identification rules as follows:

A taxpayer has the ability to substitute new replacement property or properties by revoking a previous identification in the same manner as originally identified and to subsequently identify new replacement property or properties as long as this is done in writing, within the 45-day identification period. Taxpayers should always consult with their tax and/or legal advisors about the explicit rules and restrictions for identifying replacement property in a 1031 exchange.ДЄny properties acquired by the taxpayer within the 45-day identification period are considered properly identified. This is an important aspect whenever identifying replacement property as part of a вЂњfractionalized ownershipвЂќ investment, like a TIC (Tenant-in-Common) or a DST (Delaware Statutory Trust). Taxpayers who intend to acquire less than 100% ownership interest in the replacement property should state the specific percentage of interest. Issues to consider when identifying replacement property in an exchange include situations when taxpayers plan to acquire real property which is being constructed must identify the real property and the improvements in as much detail as is practical at the time the identification is made. Improper identification in a 1031 exchange can cause a 1031 exchange to fail. legal description, street address or distinguishable name). The replacement property must be unambiguously described (i.e. Some examples of persons involved in the exchange include any of the parties to the exchange, an intermediary, a closing attorney, and an escrow agent at a title company.

#Irc 1031 code#

To qualify for a 1031 exchange, the tax code requires identifying replacement property: in a written document signed by the taxpayer hand-delivered, mailed, telecopied or otherwise sent before the end of the identification period (within 45 calendar days) to either the person obligated to transfer the replacement property to the taxpayer (generally the qualified intermediary) or any other person involved in the exchange other than the taxpayer or a disqualified person. The identification period in a 1031 delayed exchange begins on the date the taxpayer transfers the relinquished property and ends at midnight on the 45 th calendar day thereafter.

When adding the use of Section 1031 for tax deferral in the mix, taxpayers who are actively involved in a 1031 exchange on their investment real estate sales should have a good understanding of the replacement property identification rules, requirements and procedures required to have a valid and successful 1031 exchange transaction. In todayвЂ™s fast-paced and frothy real estate market throughout New England and across the country, locating the desired replacement investment property, getting offers accepted and coming to agreement are all collectively challenging.