Question

An exchange made under Section 1031 of the Internal Revenue Code in which a sale is made by a taxpayer and the proceeds are held by a facilitator until they can be used to pay for replacement property. The new property must be identified within 45 days after the title of the previous property is transferred and purchased within 180 days.

A. Deferred exchange
B. Tax-free exchange
C. Contract for deed
D. Equity exchange

Answer 1

The correct answer is option a. A deferred exchange, also known as a 1031 exchange or a like-kind exchange, is when a taxpayer sells a property and the proceeds are held by a facilitator until they can be used to purchase a replacement property. To qualify for this tax-deferred treatment, the new property must be identified within 45 days and purchased within 180 days after the sale of the previous property.

Step-by-step explanation:

The subject of this question is Business and the grade level is College.

The exchange described in the question is called a Deferred exchange, also known as a 1031 exchange or a like-kind exchange.

In a deferred exchange, a taxpayer sells a property and the proceeds are held by a facilitator until they can be used to purchase a replacement property. To qualify for this tax-deferred treatment, the new property must be identified within 45 days and purchased within 180 days after the sale of the previous property.