1031 Exchange Tax Updates

1. Taxpayers who own relinquished properties in separate entities do not need to transfer or merge the entities into correct entity. IRS held that Taxpayer, two partnerships and affiliate who entered into separate Qualified Exchange Accommodation Agreements (QEAAs) could identify up to three properties each. 

Private Letter Ruling 201242003

2. Tax Court finds that vacation home held primarily for personal use not consistent with "held for investment" intent under Section 1031.

Barry E. Moore et ux. v. Commissioner; T.C. Memo. 2007-134; No. 11002-03, May 30, 2007. 

Goolsby v. Commissioner; T.C. Memo 2010-64, April 1, 2010.

Revenue Procedure 2008-16.

3. Tax relief (extension of 45 and 180 day timeframes) in Federally declared disaster situations. 

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4. IRS LTR 200724007 does not consider Qualified Intermediary (QI) a disqualified person when less than 10% owned by disqualified persons or should QI pay a commission to a disqualified person such as an accountant or Realtor. 

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5. IRS PLR 200807005 approves of "Single Member Limited Partnership" as a disregarded entity.

In PLR 200807005, the IRS explicitly approved an arrangement where the taxpayer proposed to acquire replacement property in a like-kind exchange by acquiring 100% of the interest in a limited partnership that owned the replacement property.

6. Rev. Proc. 2010-14 Provides relief for Taxpayer reporting gain due to bankrupt Qualified Intermediary.

In Revenue Procedure 2010-14, the IRS provides a safe harbor for the Taxpayer who fails to complete an exchange due to a bankrupt Qualified Intermediary. 

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7. Non Safe Harbor Exchange - IRS view of an exchange outside the 180 calendar day safe harbor.

Effective September 15, 2000, Revenue Procedure 2000-37, Section 3, paragraph .02 states "...the Service recognizes that "parking" transactions can be accomplished outside of the safe harbor provided in this revenue procedure. 

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8. IRS Addresses Bank Merger Issues in PLR 201030020 dated July 30, 2010

Applicant requested three rulings related to qualified trusts, trustee functions and successor QI merger with another QI while exchanges are pending.

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9. IRS Ruling On Chain Of Related Party Replacement Property Purchases

In PLR 201048025 (August 25, 2010) Exchangor acquires replacement property from Related Party, who also acquires replacement property from a Related Party.  Given Related Parties are also exchanging and holding acquired property for two years, Section 1031(f) is not violated. 

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10. IRS Issues Summary Opinion 2011-14 Regarding Constructive Receipt

In Crandall, T.C. Summary Opinion "The Court notes that the tax consequences are not what petitioners intended and the result may seem somewhat harsh. However, Congress enacted strict provisions under section 1031 with which taxpayers must comply."

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