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Author: theeter Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Reinvesting Rental Home Sale Date: 10/10/2000 5:37 PM
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We are in the process of selling a piece of rental property (home) to my son. We want to reinvest the gain into another more valuable rental unit. How do we go about this? I understand that we must set up something called a section 1031. What is this? We don't want to pay in any capital gains on this property and have something else to reinvest in soon after this sale is complete. Any help or suggestions would be much appreciated.
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Author: donk23 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40755 of 121572
Subject: Re: Reinvesting Rental Home Sale Date: 10/10/2000 6:01 PM
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We are in the process of selling a piece of rental property (home) to my son. We want to reinvest the gain into another more valuable rental unit. How do we go about this? I understand that we must set up something called a section 1031. What is this? We don't want to pay in any capital gains on this property and have something else to reinvest in soon after this sale is complete. Any help or suggestions would be much appreciated.

You report like-kind exchanges on Form 8824. That form and instructions are available at the IRS website http://www.irs.gov/forms_pubs/index.html (or directly, here: http://ftp.fedworld.gov/pub/irs-pdf/f8824.pdf).

The instructions give you an overview of the requirements. However, especially if you have a significant amount of money involved, you'll probably want to enlist the help of an attorney or CPA or both with experience in such transactions.


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Author: criser Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40770 of 121572
Subject: Re: Reinvesting Rental Home Sale Date: 10/11/2000 12:43 AM
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If you intend to do a tax-free exchange (a 1031 exchange), you MUST have someone to handle it for you - do-it-yourself is not an option. If you do it yourself by selling this property then buying another and calling it an exchange it will not work.

The only kind of exchange in which you don't need a qualified intermediary (a technical term) is one in which the exchange is between two parties directly (e.g., you and I swap rental properties). Otherwise, if you're doing a non-simultaneous exchange or an exchange involving third parties like you're talking about (selling your relinquished property to a third party and afterwards acquiring your replacement property from yet another third party), you need a professional involved.

Tell your broker and your attorney that this is your plan and hope that it isn't too late. Usually you should inform the broker of your intention to do an exchange when you list the property so that the sales contract will contain provisions requiring the buyer to cooperate in the 1031 exchange, which takes no real effort on the buyer's part and doesn't disadvantage the buyer, except that in your case it might cause a little delay while the exchange paperwork is completed and documents are revised.

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