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I purchased an asset in 2013 and sold like kind asset 2016…

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I purchased an asset...

I purchased an asset in 2013 and sold like kind asset 2016 can we use the like kind exchange on this purchase sale? the asset we sold was used as collateral for the asset purchased in 2013

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Wanting to now if we can use the like kind exchange or do we have to use the capital gain. Also the asset was paid for in 2016 and 2017

Submitted: 8 months ago.Category: Tax
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10/17/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 8 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

Q: I purchased an asset in 2013 and sold like kind asset 2016 can we use the like kind exchange on this purchase sale?

A: In brief, the answer is no. There are two time limit requirements that have to be met relating to this matter, and you do not meet the time limit requirements. SEE BELOW:

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What are the time limits to complete a Section 1031 Deferred Like-Kind Exchange?

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.

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.

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.

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.

REFERENCE SOURCE:

https://www.irs.gov/newsroom/like-kind-exchanges-under-irc-code-section-1031

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You do not qualify to use the like kind exchange to defer the capital gains.

If you do not require further assistance with this matter, I ask that you please take the time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated. Thank you in advance.

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