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Cash Boot is any boot received by the taxpayer, other than
mortgage boot. Cash boot may be in the form of money or other
property.
Held for business use properties such as rental income
properties and properties held for investment such as raw land
qualify. Properties held for personal us or for resale such as
inventory or dealer properties do not qualify.
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What are the Identification Rules
for Replacement Property?
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The taxpayer must meet the requirements of at least one of the
following 3 rules:
3-Property Rule: The taxpayer may identify up to 3 potential
replacement properties, without regard to their value; or
200% Rule: Any number of properties may be identified, but their
total value cannot exceed twice the value of the relinquished
property,
95% Rule: The taxpayer may identify as many properties as he
wants, but before the end of the exchange period the taxpayer
must acquire replacement properties with an aggregate fair
market value equal to at least 95% of the aggregate fair market
value of all the identified properties.
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What are the Time Requirements
on Replacement Property?
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The taxpayer has 45 days after transferring relinquished
property to identify potential replacement properties. The
taxpayer must complete the exchange by receiving replacement
property within 180 days after the transfer of the relinquished
property, or the due date of the taxpayer's federal tax return
for the year in which the relinquished property was transferred,
whichever is earlier.
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What if I can’t meet the time requirements?
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The regulations provide no exceptions to the time
requirements. If the taxpayer does not meet the time
requirements set forth in the regulations, the exchange will
fail. The taxpayer will then pay the appropriate taxes arising
from the sale of the relinquished property.
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