Chapter 13 - Non Taxable Exchanges Flashcards
1031 exchanges only apply to
Real property used in a trade or business to produce income
Like kind property
US real property for foreign real property
Number of days to identify property in 1031 exchange
45 days
Number of days to close on property in 1031 exchange
earlier of 180 days or filing due date of tax return
Related party 1031 exchange holding period
2 years
Boot received
Liability relief received or cash received - normally trading down
Gain realized to the extent of boot received in year of transaction
1031 recognized gain
lesser of deferred gain or boot received
1031 losses
Boot reduces basis when there is a loss
Section 1033
Involuntary conversions from natural disasters, theft, seizure, condemnation
Indirect conversion
receiving cash proceeds instead of a replacement property right away
Section 1033 tests
Functional test
Taxpayer use test
Functional test
Property must serve the same function as the original property
Taxpayer use test
Property must be used in an activity that is treated the same way that the old property was treated for income tax purposes
Involuntary conversion time period
Natural disaster - 2 years
Condemnation - 3 years
Presidentially declared disaster - 4 years
Direct conversion
Property is replaced instead of purchased
Basis and holding period are the same as the original property
Section 121
excludes gains on sale of principal residence up to $250,000 single or $500,000 MFJ
Must have been owned and used as principal residence for 2 out of the last 5 years
Can only be used once every 2 years
