In reviewing the gain realization and recognition rules established by Treasury Regulations, Revenue Rulings, and court decisions, the attorney should remember that a two-party exchange paradigm often serves as the basis for analysis. Conforming application of these rules to fit modern multiparty exchanges, most of which are deferred, is thus often necessary.

Although IRC §1031 generally defers the recognition of gain or loss on the exchange of like-kind property, a taxpayer who receives money or other property in addition to the like-kind property recognizes gain, but not loss, to the extent of the sum of the money and the fair market value of the other property received, Losses are not recognized even if the taxpayer receives money or other non-like-kind property in the exchange. If however, a taxpayer gives up non-like-kind property (other than cash) together with the like-kind property, loss is recognized to the extent that the adjusted basis of the non-like-kind property transferred exceeds its fair market value (just as loss would be recognized if the non-like-kind property were sold).

The following links will provide you with access to resources on the internet that will help educate you regarding 1031 property exchanges issues and answer questions regarding your exchange. Caution: The rules regarding 1031 property exchanges are complex and many of the concepts have developed over time through IRS Private Letter Rulings. Undertaking any exchange without the council of your attorney, tax advisor, and a Qualified Intermediary is not recommended.

IRS Code, Rules, Regulations, And Procedures

• IRS 1031 Complete Code (provided by Cornell Law School)
• IRS Publication 544 Sales and Other Disposition of Assets
• IRS Form 8824
• IRS Frequently Asked Questions 1031 Exchanges
• IRS Like-Kind Exchanges Real Estate Tax Tips

REVENUE RULINGS:

• Revenue Ruling 2002-83 Related Party Like Kind Exchanges
• Revenue Ruling 1992-105 Illinois Land Trust Ruling

REVENUE PROCEDURES:

• Revenue Procedure 2003-39 LIKE Program 1031 Exchanges
• Revenue Procedure 2002-71 Time for performing certain acts allowable postponement
• Revenue Procedure 2002-69 Classification of entities
• Revenue Procedure 2002-22 Tenancy in Common - undivided interests
• Revenue Ruling 2000-46
• Revenue Procedure 2000-37 Parking Arrangement for Reverse and Build-To-Suit Exchanges

Seminars

We are available to conduct 1031 seminars for your company, group, or organization. We are also getting our seminars qualified for continuing education for realtors, attorneys, appraisers, and title companies. The seminars are complete Power Point presentations with text and graphics to help improve your understanding of 1031 exchanges. To schedule a seminar just contact us at (866) 554-1031 or to e-mail us click here.

Internal Revenue Code (IRC), Department of the Treasury Regulations, Internal Revenue Service Rulings and Pronouncements, Procedures, Notices, Publications and Forms Internal Revenue Service Publications and Forms

• IRS Publication 3 - Armed Forces' Tax Guide
• IRS Publication 523 - Selling Your Home
• IRS Publication 544 - Sales and Other Dispositions of Assets
• IRS Publication 555 - Community Property (including list of states)
• IRS Form 8824 (2002)
• IRS Form 8824 (2003)
• IRS Form 8824 (2004)

Internal Revenue Service links

• This Internal Revenue Service web site link provides IRS news for specific states, primarily regarding disaster relief and/or tax provisions that affect certain states

Basic Statutory Requirements Overview

Type of property requirement. Only a transfer of property is subject to like-kind exchange treatment; provision of services is not. Neither the property relinquished nor the property received may be a type of property expressly excluded from the statute . 

Qualified Use Requirement

Both the property relinquished and the property received in the exchange must be held by the taxpayer for productive use in a trade or business or for investment at the time of the exchange

Like Kind Requirement

The property received in the exchange transaction must be of like-kind to the relinquished property.

Exchange Requirement

The transaction must be an exchange of relinquished property for replacement property, not a sale of the relinquished property followed or preceded by a purchase of another property.

Time Requirement

If the exchange is non simultaneous, the replacement property must be
(a) identified no later than 45 days after the date on which the relinquished property is transferred and
(b) received by the taxpayer on or before the earlier of:

1. 180 days after the date on which the taxpayer transfers the relinquished property or
2. the due date, including any allowable extensions, for the taxpayer's tax return for the taxable year in which the relinquished property is transferred.