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Q:
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I'm planning to do a 1031 exchange and thought I'd have my attorney, accountant or real estate broker act as
Qualified Intermediary. Wouldn't that be easier?
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A:
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No. The Internal Revenue Code ("IRC") disqualifies certain parties from acting as Qualified Intermediaries.
These include attorneys, accountants, real estate brokers, investment bankers or the taxpayer's employees
(if you've had a relationship with them within 2 years of the exchange transaction). The IRC also
disqualifies anyone who is related by blood or related for tax purposes. [For more specifics, please see
Section 707(b) or 267(b)].
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Q:
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I know that I have 45 days from the sale of my relinquished property to identify properties, but I can't decide
which one. Can I identify more than one property?
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A:
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In identifying property within the 45 day period, several options apply: (1) You may identify up to three (3)
properties, regardless of their value(s); (2) You may identify any number of properties as long as the total value
of all the identified properties combined does not exceed 200% of the value of the property that you sold
(the relinquished property); or (3) You may identify any number of properties that exceed the 200% rule as long
as you acquire essentially all of the properties identified.
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Q:
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I'm selling property that I own individually, but I'd like to add my spouse to the title of the property I purchase.
Is that ok?
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A:
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No. There is a "same taxpayer rule" which states that the taxpayer conveying the relinquished property must be the
same as the taxpayer purchasing the replacement property.
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Q:
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I'm selling property and want to take advantage of the benefits of a 1031 exchange, but I'd also like to keep some cash
from my sale. What can I do?
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A:
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You can receive same cash from the sale of your relinquished property and still do a 1031 exchange. You will pay tax
on any cash received. However, you may only receive cash at the closing of the relinquished property or after the
closing of the replacement property, once the exchange has been completed in its entirety. The QI may not
disburse money to you during the exchange period.
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1031 EXCHANGES
