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kyoung81321
New Member

I sold an investment home, and used the proceeds to pay down on a rental property. Without touching the money. Can I claim this on a "like kind exchange"? form 8824?

 
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MichaelL1
Level 15

I sold an investment home, and used the proceeds to pay down on a rental property. Without touching the money. Can I claim this on a "like kind exchange"? form 8824?

Unfortunately, you can not do it after the fact.  This has to be clearly identified ahead of time, and the other party has to be aware of this. See the IRS link and detail below.  

The last sentence of the link says "Taxpayers may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale."   this is under the Beware of Schemes" section. 

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

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.

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1 Reply
MichaelL1
Level 15

I sold an investment home, and used the proceeds to pay down on a rental property. Without touching the money. Can I claim this on a "like kind exchange"? form 8824?

Unfortunately, you can not do it after the fact.  This has to be clearly identified ahead of time, and the other party has to be aware of this. See the IRS link and detail below.  

The last sentence of the link says "Taxpayers may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale."   this is under the Beware of Schemes" section. 

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

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.

View solution in original post

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