Posted by JHyre in Ohio on November 05, 2001 at 11:04:57:
The 180 days on the particular 1031 that you are dealing with end in Feb. So the exchange started in early September…let’s say Sept 5th. The 45 day period to designate replacement properties for that exchange would have passed on October 20th. You presumably did not designate the target property before October 20th. As such, proceeds from the property relinquished on Sept 5 1031 may not be used to purchase target. Sounds like you are on the hook for the tax on the $75k. If you sell the “new” property, any gain on THAT property can be deferred (assuming no dealer issues, etc.), but NOT the gain on the Sept. 5th property. Bummer. Sounds like you may need another drink.
Posted by Ben (NJ) on November 03, 2001 at 21:35:54:
I am about to finish a 1031. I close on the target property
in about three weeks. There will be about $75,000 left over which I just figured I would have to pay capital gains on.
However, I recently took title to another property and already have a buyer. Therefore I am wondering if I can do
a second 1031, use the proceeds from the most recent sale COMBINED with the excess $75,000 from the first 1031 and roll everything into a second target property. Note the deadline for target one is February so I figure if target two is also done by February then there should be no problem using that $75,000. Is this kosher? (I had a couple of martinis so hopefully this is making sense). LOL
some specifics (on the martini ) - Posted by Ben (NJ)
Posted by Ben (NJ) on November 04, 2001 at 12:00:54:
tried those fancy ones (absolut vodka with raspberry chambord) not that great but packed a punch.
Anyway, this is how the deal went. I owned three houses and started the selling process in early September. I already closed on two and will close on the third on November 20, 2001. Those deals put $416,000 total in escrow. On December 20, I will close on the target property, a townhouse, for $340,000. This leaves $76,000 left over. The 180 days relative to that 1031 will expire in early February 2002. I planned on just paying the capital gains tax on that $75,000 but just came up with a new plan.
Now my plan. I have already taken title to another house AND already have a buyer lined up. Although the
timing might be a little tight, I am wondering if I
sell this property and purchase the NEW target property
by early February, whether I can throw in that leftover
$75,000 sitting in the escrow account and COMBINE it with the new sales proceeds making it part and parcel of the NEW 1031 exchange. It seems reasonable as long as I still meet that 180 day deadline, but then again what does reason have to do with the law? Thanks JHyre.