Discussion:1031 or Schedule D

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Tax Questions --> 1031 or Schedule D

Bonnyl56 (talk|edits) said:

25 January 2006
I have a client who is selling residental with a rental on it. Father owned it for 30 years and she inherited 1/2 in 01. Father quick claimed to her in 04. She is purchasing 2 rental properties valued at 350K each. Home is selling for 1.1M with 145K cr at close of escrow. After 50K commision, she should have approx 900,000 left. I have never done a 1031 and wish for some guidance here as to what the best tax advantage is for her. Her yearly income is below 20K

Thank you Bonny

Solomon (talk|edits) said:

26 January 2006
If she sells it, unless she assigns rights to a qualified intermediary, there is no like kind exchange so no 1031 needed.

Bonnyl56 (talk|edits) said:

26 January 2006

Thank you for your reply. I think I am confused as to the qualified intermediary. I thought from reading the IRS form on like-kind exchanges that rental for rental qualified as like-kind.

If you wouldn't mind could you explain the qualified intermediary? I probably sound very ignorant, but, I would rather give sound advice than wrong advice.

Thanks Bonny

DZCPA (talk|edits) said:

26 January 2006
In order to qualify as a 1031 exchange, proceeds from the sale can not go to you . They must go directly into the new properties or to an accomodator (qualified intermediary) who will then transfer the proceeds into the new property. There are time requirements which must be met. An accomodator (qualified intermediary) can help you will all the details.

Solomon (talk|edits) said:

26 January 2006
DZ is right. If she takes money it is a sale. The time periods with a qualified intermediary are: 1. Property to be received must be identified in writing within 45 days and 2. received within 180 days or by the filing date of the return including extensions.

Bobbyd (talk|edits) said:

26 January 2006
You are absolutely correct! We had similiar experienc with client who used a specialist ( check Google) for their 1031 exchange. :)

Lois (talk|edits) said:

26 January 2006
A qualified intermediary should be hired prior to the contract being closed. Their fee is generally around $750. They actually are the 'sellers' of the property and the 'purchasers' of the new properties. They handle all the requirements of timing and funding. If you don't have one check with local mortgage companies and they can direct you to a company.

RLMCPA (talk|edits) said:

29 January 2006
You may also have gift issues when Dad quit claimed the property to her in 2004, including the need for Dad to file a gift tax return in 2004 since value appears to be greater than annual exclusion of $11,000 (2004) and Dad's basis becomes her basis. Just food for thought as you consider the other complexities that you're dealin with.

Ax158 (talk|edits) said:

2 March 2006
Many banks will handle the money for a 1031 exchange. Call your banker.

To join in on this discussion, you must first log in.
Personal tools