Nontaxable exchanges

1
Non-taxable exchanges
2
Sale of a Personal Residence

• Section 121
• 250,000 (500,000 for mfj)
• 5 year ownership test
• 2 year use test - principal residence
• pro-rate for forced sale
• special rules for mfj filing
• limit once every two years
• does not apply to depreciation gain
• old section 1034 and 121 rules repealed

3
Involuntary Conversion

• Section 1033
• Property to to Property
• Elective generally
• Qualifying event
• theft, casualty, condemnation or sale under
  threat of condemnation
• Time test for reinvestment
• Similar or related in use test for replacement
  property

4
Like Kind Exchange

• Section 1031
• Property to property exchange - no actual or
  constructive receipt of cash allowed
• Eligible property must be held for use in a trade
  or business or as an investment for profit
• ineligible property inventory, securities,
  interests in partnerships, trusts or rights in
  lawsuit
• Like kind property any real estate for any real
  estate regardless of class personal property of
  like class

5
Like Kind Exchange

• No gain or loss shall be recognized on the
  exchange of property held in a trade or business
  or for investment if such property is exchanged
  solely for property of a like kind.
• Not like kind property is considered boot
• Boot received is the measure of recognized gain
• Boot is money, debt relief, fmv of not like kind
  property received

6
Like Kind Exchanges

• Non-simultaneous exchanges
• 45 days identify property
• 180 days exchange property
• Money may remain unpaid or in escrow out of reach
  of transferor