Subject:  1031 Exemption
From:  Robert
Date:  Sat, 22 May 2004

We have a purchase contract to buy rental property, for which we have made a down payment. We are also trying to enter an agreement to sell rental property and vacant lots to finance the purchase. We hope to have the money from the purchase before we finalize a note, for which we have applied. Can we still make a 1031 exchange, since we had a purchase contract for the property before selling the others? If we qualify, is there the 1031 exchange a one-time election, or is there a time constraint to use is again?

Answer

Date:  28 May 2004

Hello Robert,

No. Someone may be thinking about rules that were repealed in 1997.

An exchange can be made when a contract for purchase has been entered before the contracts to sell. There is no holding period requirement for a 1031 exchange, and it is not a one-time election. I highly recommend that you pay for professional assistance if you decide to go ahead with an exchange. It’s too easy to foul an exchange up, resulting in an unexpected tax liability.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

Subscribe to Michael Gray, CPA's Tax & Business Insight Name: Email: We respect your email privacy Powered by AWeber Email Marketing