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Exchanging Rental Properties |
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I am considering selling a rental property I own and taking the profit to invest in another rental property. If I do this is there a tax break of some kind? And if so, what is the time limit I have buy the new property in? |
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Yes, there is indeed a tax break. It will allow you to postpone (not avoid completely) taxes on your profit from the first sale so you can put the proceeds into the purchase of a similar ("like-kind") replacement investment. You do have time limits -- 45 days in which to identify the replacement property (on the proper forms) and 180 days in which to complete both transactions. THhe IRS says you must not hold any proceeds while the second deal is pending, so you should do the whole thing under the guidance of a qualified intermediary (also known as a facilitator or accomodator.) Look for a lawyer, accountant or broker who handles Section 1031 tax-deferred exchanges. |
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Edith
Originally published on August 1, 2007 |
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