Internal Revenue Code section 1031 allows you to defer capital gains taxes upon sale of a property held for investment or use in a trade or business through a like-kind exchange. Under treasury regulations providing for special safe harbor structures using a qualified exchange intermediary, the identification of the property to be acquired in such an exchange (the "Replacement Property" can be deferred for up to 45 days after the sale of the client's property (the "Relinquished Property"), and the acquisition of the Replacement Property can be deferred for up to 180 days after the sale of the Relinquished Property.
The typical IRC §1031 like-kind exchange requires a series of important steps:
- The client enters into a contract to sell the Relinquished Property to a buyer.
- The client then enters into an exchange agreement with a qualified exchange intermediary.
- The client's contract with the buyer to sell the Relinquished Property is assigned to the intermediary.
- At closing, the client deeds his or her property (the "Relinquished Property") directly to the buyer, but by a Substitution Agreement between the client and the buyer, the intermediary is interposed in the transaction as the seller and holds the proceeds for use in acquiring like kind Replacement Property.
- The client then locates and "identifies" to the intermediary one or more Replacement Properties within 45 days and signs a contract to purchase it.
- This contract, in turn, is assigned to the exchange intermediary.
- No later than 180 days after the sale of the Relinquished Property (or the due date of the tax return for the year in which the Relinquished Property was sold, whichever is earlier), the seller then deeds the Replacement Property directly to the client, with the intermediary interposed in the transaction as the seller, and the proceeds the intermediary is holding are used to pay for the Replacement Property.
Vast Experience in Tax Free Exchanges
Deferred like-kind exchanges under section 1031 of the Internal Revenue Code have become highly popular as a means of building large real estate portfolios. The Louisiana tax lawyers at The Baringer Law Firm, LLC have extensive experience in such transactions, having represented parties to the exchange, qualified exchange intermediaries, and in serving as exchange intermediaries. Representative transactions include serving as counsel in forming and representing an exchange intermediary in a reverse like-kind exchange of a $35 million 20-story office building. For those who already have a tax advisor to guide them through the exchange, The Baringer Law Firm, LLC can provide exchange intermediary services through its affiliate Nationwide 1031 Exchange Professionals, L.L.C. Reverse exchange qualified exchange accommodation titleholder services are provided through its affiliate Nationwide E-A-T, L.L.C.
The attorneys have extensive backgrounds in finance, accounting and tax. Two of the attorneys hold advanced degrees in tax law, and another has a B.S. degree in Accounting (Magna Cum Laude) in addition to being a lawyer. Attorney Dale R. Baringer has taught numerous courses on 1031 exchanges, business organizations, corporate law and taxation. Contact the firm