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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10109
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My investment property was condemned.I purchased the

Customer Question

My investment property was condemned.I purchased the property for $35,000, received a net condemnation award of $50,000, and purchased replacement property for $80,000. What is my gain recognized after the replacement property is purchased?
$0
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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(So sorry), but your gain is 50,000 - 35,000 = 15000

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You would only be able to roll basis into (said differently, defer gain into) a new investment property if you do a 1031 exchange by using a qualified intermediary.

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Expert:  Lane replied 1 year ago.

Here's a lost of SOME Q.I.'s

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Expert:  Lane replied 1 year ago.

The time limits (another requirement of the 1031 exchange) CAN be extended, but only for "Presidentially Declared" Disasters.

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See this from IRS:

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While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.

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The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

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Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.

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The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

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Expert:  Lane replied 1 year ago.

Finally ...a little more information about the Qualified Intermediary (Q.I.)

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From IRS:

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It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

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One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

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You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.

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Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer.

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Expert:  Lane replied 1 year ago.

Finally ...a little more information about the Qualified Intermediary (Q.I.)

...

From IRS:

...

It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

...

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

...

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.

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Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer.

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Expert:  Lane replied 1 year ago.

Hope this helps ... Let me know if you have questions...

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Lane

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If this HAS helped, and you don’t have additional questions on this, your positive rating … (by clicking or touching the stars or smileys on your screen) … would be appreciated!That’s the only way I'll be credited a portion of what you've paid JustAnswer.

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Expert:  Lane replied 1 year ago.

Did you see my answer?

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