Like-Kind Property: Does Federal or State Tax Law Control?

The Internal Revenue Service’s Chief Counsel Advice (CCA) #201238027 addresses the issue of whether state law characterizations of property as real or personal are determinative of whether property is considered “like-kind” pursuant to Internal Revenue Code Section 1031. Section 1.1031(a)-1(b) of the regulations notes that the words “like-kind” refer to the nature or character of a property, but not its grade or quality. Since state laws differ in how they characterize real and personal property, relying strictly on state law property classifications would result in federal tax law being dependent on state laws and state policies. This would be problematic for investors seeking Section 1031 tax deferral involving properties with different property classifications in different states.

The conclusion reached in CCA 201238027 is that federal income tax law preempts state law for determining whether exchanged properties are treated as like-kind for purposes of IRC Section 1031. Although state law property classifications are one relevant factor for determining if property is considered real or personal, the determination should ultimately be made under federal tax law by considering all of the taxpayer’s facts and circumstances.

To read more about the applicable law and analysis, click on CCA 201238027.

1031 Basics: Reverse Exchanges

1031 Exchange Basics

A reverse exchange is the purchase of the replacement property prior to closing on the relinquished property. An investor may need to consider a reverse exchange where properties are selling quickly and inventory is scarce. The most common variation (often called "Parking the Replacement Property”) involves the qualified intermediary first purchasing the replacement property. When the relinquished property is sold at a later date, the qualified intermediary completes the exchange by deeding the replacement property back to the taxpayer. It is especially crucial that the qualified intermediary has in-depth knowledge of the steps and precautions necessary to help lead the investor safely through a minefield of potential hazards.

To learn more about Reverse Exchanges, Read More…

IRS: 10 Tax Tips for Home Sellers

The IRS has recently issued a helpful list 10 tax tips all homeowners should keep in mind when selling a home:

1. You are usually eligible to exclude from gross income any gain realized upon the sale of your home if you have owned and used your home as your principal residence for periods aggregating two years out of the five years prior to the date of its sale.

2. If you realize a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your gross income ($500,000 on a joint return in most cases).

3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

For the rest of the 10 Tax Tips for Home Sellers, Read More…

Tax Tip – Renting a Vacation Home

Watch this video from the IRS about when and how to report rental income from a vacation home, Watch Now…

IRS Provides Tax Relief to Victims of Hurricane Isaac

Certain taxpayers may qualify for postponement of the exchange deadlines in Section 1031 if the relinquished or replacement property is located in a Presidentially declared disaster area, or if the principal place of business of a party to the transaction is located in a covered disaster area. Taxpayers can also qualify by satisfying other criteria. The Internal Revenue Service is providing tax relief to individuals and businesses affected by Hurricane Isaac. IRS filing and payment relief applies to the following localities:

  • In Louisiana: Ascension, Assumption, East Baton Rouge, East Feliciana, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington and West Feliciana parishes;
  • In Mississippi: Adams, Amite, Clarke, Forrest, George, Hancock, Harrison, Hinds, Jackson, Lincoln, Marion, Pearl River, Pike, Stone, Walthall, Warren and Wilkinson counties.

For updates or more information, Visit the IRS’s Tax Relief in Disaster Situations webpage.

1031 Exchange Webinar for Accountants (1hr CPE Credit)

Title: The Power of Strategy: Mastering 1031 Tax Deferred Exchanges
Presenter: Scott Saunders, Asset Preservation, Inc.

Course Description
This one hour course provides a concise and thorough overview of IRC Section 1031 tax deferred exchanges for accountants, CPA’s and tax advisors. In addition to covering critical IRS time deadlines, like-kind requirements and other exchange-related issues, the class will provide a summary of current developments including applicable Revenue Rulings, PLR’s and other IRS guidance on current issues related to exchanges.

Course Details:
Date: Tuesday, October 30, 2012
9:00 a.m. – 10 a.m. (PST)
Cost: Free
CPE Credits: 1 hour (Accountants & CPAs)

Click here to View Details and Registration Info at

When to Pay the Piper (and how much will he charge)?

By Jon Christianson, Esq., JD, LLM Tax

Tax rates on capital gains are scheduled to increase in 2013 if Congress fails to extend the current rates. Should I pay my tax now or take a wait and see approach with a 1031 exchange?

For the full article on When to Pay the Piper (and how much will he charge)?, read more…