Tax Guru – Ker$tetter Letter

Q:

Subject: Exchange Question

Can I exchange a 4-unit income property for a personal property? Or might I be able to sell the income property and do an exchange for a
payoff of my personal residence and obtain a second residence as well.

A:

You really should be discussing this kind of thing with your own professional tax advisor who can assist you better than I possibly could.

I have actually covered these points on several occasions in my blog and on the TFEC website.

Basically, a qualified exchange for your rental property will require that the proceeds be used for the acquisition of one or more business, investment or rental properties within the statutory time-frames.

Using the proceeds to acquire personal use property will not be acceptable.  Nor will using the proceeds for payments on debt of currently owned property.  You need to acquire new (to you) property.

Good luck.  I hope this clears this up for you. Your own personal professional tax advisor can give you much more specific guidance on how these will affect your unique tax situation.

Kerry Kerstetter