Top Ten 1031 Exchange Misconceptions
1. Like-kind means I must exchange the same type of property, such as apartment building for apartment building.
No. The taxpayer has 45 days to identify the new replacement property and 180 days to close.
No. A valid exchange requires much more than just reporting the transaction on Form 8824. One of the biggest traps when not structured properly is the taxpayer having actual or constructive rights to the exchange proceeds and triggering a taxable event. For more information on tax filing requirements, go here.
No. Anyone owning investment property with a market value greater than its adjusted basis should consider a 1031 exchange. To find out how to use 1031 exchanges as a retirement planning tool, go here.
The 1031 regulations do not list a time requirement on how long you must hold property, but it does say that property must be “held for productive use in a trade or business or for investment”.