HERE ARE THE BASICS OF AN EXCHANGE

Dated: 02/12/2020

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HERE ARE THE BASICS OF AN EXCHANGE


Property Status 
If the Relinquished Property (the property you are selling) is in escrow, immediately contact an Exchange Accommodator. Once escrow closes,
unless appropriate measures were taken, you will be disqualified from conducting an exchange.

Property Qualifications 

The properties involved in an exchange must be held for productive use in trade, business, or for investment purposes. A personal home can be converted to qualify, but it is a lengthy process and should be discussed with a qualified professional early on.

Timeline 
The Identification Period begins upon the close of escrow of the Relinquished Property. All potential replacement properties must be unambiguously identified in signed writing by midnight on the 45th day.  The replacement property (or properties) must be acquired on or before midnight of the 180th day of the exchange. NO EXCEPTIONS.

The 3 Property Rule 
The 3 Property Rule allows for identification of up to three U.S. properties, without regard to fair market value of the properties.

The 200% Rule 
The 200% Rule allows for identification of four or more properties as long as the combined value of all properties identified does not exceed 200% of the fair market value of the Relinquished Property.

Tax Deferral 
To defer all capital gains tax, an Exchangor must reinvest 100% of the sales price of the Relinquished Property in a property (or properties) of equal or greater value. This means that if the property was mortgaged, the Exchangor will have to come up with the cash for the difference or will need to obtain another mortgage to reach the sales price.

What If I Don't Want To Invest All of The Cash?
If an exchange is otherwise in compliance with all relevant I.R.S. guidelines, only the portion of cash received by the Exchangor will be subject to taxes. The tax consequence occurs the year the cash was received.

Timeline 180 Day Rule
Day one of the exchange begins on the date of close of escrow on the Relinquished Property. An exchange client must complete purchase of the Replacement Property by day 180. The only exception is a presidentially declared federal disaster that specifically extends this timeline.

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Harry Patel

As an experienced Realtor, I am ready to assist you with all of your real estate needs. My approach is customized for each client; my solutions are never one-size-fits-all! Please view this website a....

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