Re: Capital gains avoidance strategies wanted - Posted by Jimbob
Posted by Jimbob on November 10, 1998 at 10:56:21:
If your inlaws sell home A, they will have 45 days from the time of closing to identify the next property they wish to invest in, they will then have 180 days to close the deal. If they do this successfully, they can avoid capital gains tax. This transaction must be done by a qualified exchangor or tax attorney, there are many loose ends that need to be tied up, and if you miss one, you’re out of luck. The profits from the sale of the investment property must be held by a third party and can never touch your hands or it becomes taxable or “boot” as known in the exchange world.
You did not mention whether or not property B was a primary residence or another investment property, therefore I cannot answer that question however, the profits or proceeds from the sale of an investment property cannot be applied to a primary residence in any way.
The rule of thumb is the property sold and the property being acquired must be “like kind” in other words, a rental house for an apartment building, a vacant lot for a shopping center, the bottom line is “investment for investment”.
There are many sources of 1031 tax deferred exchange information on the internet, try looking them up with a search engine.