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NO DO-OVERS WHEN THE SWAP TAKES TOO LONG
May 13, 2008
A reader poses a Section 1031 problem:
After selling property using a qualified escrow arrangment, Taxpayer A contracts to purchase replacement like kind property. The contract requires the seller, Taxpayer B, to replat the property, but that doesn't happen and the deal doesn't close in 180 days.Can Taxpayer A get an extension of his 180-day deadline?
If you enter into a deferred like-kind "Section 1031" exchange, you have 45 days to identify replacement property and 180 days to close, or the exchange fails to qualify and the escrowed proceeds become taxable. Unfortunately for Taxpayer A, there are no extensions or do-overs. The sale of his original property is now taxable. He may or may not have a case against Taxpayer B under contract law, but as far as the tax law is concerned, he loses.
Link: IRS Fact Sheet on Like-kind Exchanges.
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Comments
But you can try to roll it into an installment sale, right? ;->
Posted by: Apep | May 13, 2008 2:44 PM