How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lane Your Own Question

Lane
Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3695
Experience:  Providing Financial & Tax advice since 1986
Type Your Tax Question Here...
Lane is online now
A new question is answered every 9 seconds

Section 1239 property transfer. I need to transfer a rental

Resolved Question:

Section 1239 property transfer.
I need to transfer a rental property owned by myself to a company that I own. The property has appreciated significantly, so by Sec. 1239 I would have to pay a lot of tax because the gain has to be recognized as "ordinary income". I've heard there are "like kind" exchange rules, where if I purchase a property of a similar value within the same year then I don't have to recognize the gain. What are the limitations on that? Do I have to use some intermediaries or I can just go and buy another property myself?
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Lane :

Hi, yes one of the basic requirements of dong a 1035 exchange (where the basis of the original property essentially follows you into the new property) is that you use a qualified intermediary

Lane :

FIist, the property has to be investment roperty

Lane :

Second, you have 45 days from the closing of your sale to list the properties you may want to buy. There are no exceptions to the deadline

Lane :

Trird, there's a 180 Day Exchange Period. From the sale closing date, you have 180 days to close on the purchase of one or more properties from the 45-day list. Again, there are no exceptions to this deadline.

Lane :

(Rule number 4 answers your question): The IRS mandates that you use a (Qualified Intermediary) QI to prepare the legal documents for your exchange. Because the QI must be independent, it cannot be your friend, employee, broker, or even your accountant or attorney. The QI also holds your money, so that you do not have access to it.

Lane :

Next to last rule ( Number five): You must purchase and take title to your new property exactly as you held title to your old property. (can't move from individual to joint tenancy, for example)

Lane :

And last (rule six): is called the reinvestment requirement: To defer all of your capital gain tax, you must buy a property equal or higher in value than the one you sold. Also, you must reinvest all of the cash proceeds from your sale.

Lane :

Finally, here's the IRS guidance on this: http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031

Lane :

I see you're typing... I'll wait :)

Lane :

I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)

Customer:

Thank you. What are the rules on QI? Meaning is it difficult to qualify? I have an unrelated company that can help me with that, if it not too difficult to qualify as QI

Lane :

Sure let me get that for you

Lane :

A “Qualified Intermediary” (QI) is an eligible person that enters into a QI Agreement with the IRS pursuant to Rev. Proc. 2000-12, 2000-4 I.R.B. 387, and that acts as a QI under such Agreement. Generally, under the QI Agreement, the QI agrees to assume certain documentation and withholding responsibilities in exchange for simplified information reporting for its foreign account holders and the ability not to disclose proprietary account holder information to a withholding agent that may be a competitor.

Lane :

he following entities may enter into a QI Agreement:




  1. A foreign financial institution or foreign clearing organization (other than a U.S. branch or office),



  2. A foreign branch or office of a U.S. financial institution or clearing organization,



  3. A foreign corporation, but only for the purpose of claiming treaty benefits for its shareholders, or



  4. Any other entity acceptable to the IRS, determined on a case-by-case basis.

     



Customer:

I don't understand, why does this entity have to be foreign? Are you sure we are talking about the same QI here?

Lane :

Doesn't have to be... they are just making the pint that foreign entities have FURTHER qualifications

Lane :

US intermediaries come under number 4

Lane :

If you just GOOGLE "List for Qualified Intermediaries" you see a huge number of them

Lane :

There guys, for example, do a LOT of it: http://www.expert1031.com/1031experts/index.html

Customer:

Ok, thanks

Lane :

YW, good luck with it

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3695
Experience: Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 9 months ago.

Thanks so much Anton!

If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.

Thanks again,
Lane

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.