Question

The sale of old property and the purchase of new property, even though like kind, is generally Delayed (nonsimultaneous) exchanges are allowed, but ?

a) The properties must be located in different states.
b) The replacement property must be identified within 45 days.
c) The taxpayer is not allowed to receive any cash in the exchange.
d) The transaction must be completed within 180 days.

Answer 1

The correct answer is (b): The replacement property must be identified within 45 days. This is a key rule for delayed 1031 exchanges under the Internal Revenue Code Section 1031.

Step-by-step explanation:

When it comes to the sale of old property and the purchase of new property, even like-kind, Internal Revenue Code Section 1031 outlines specific rules for what is known as a 1031 Exchange. One important aspect of a 1031 Exchange is that it can be delayed or nonsimultaneous. Here are the rules that apply to such transactions:

• The properties do not have to be located in different states.
• The replacement property must be identified within 45 days after the sale of the relinquished property.
• The taxpayer can receive cash, but it will be subject to tax as 'boot'.
• The entire transaction must be completed, meaning that the replacement property must be received, within 180 days after the sale of the relinquished property or the due date of the taxpayer's tax return for that year, whichever is earlier.

Answer choice (b) - The replacement property must be identified within 45 days - is the correct statement regarding delayed 1031 exchanges.