Articles related to Forward Exchanges.

Deferred Exchanges: Avoiding Traps for the Unwary

Tax-deferred exchanges of real estate have been recognized by the Internal Revenue Code (IRC). The comprehensive set of tax laws created by the Internal Revenue Service (IRS). This code was enacted as Title 26 of the United States Code by Congress, and is sometimes also referred to as the Internal Revenue Title. The code is organized according to topic, and covers all relevant rules pertaining to income, gift, estate, sales, payroll and excise taxes. Internal Revenue Code Internal Revenue Code since the 1920s. Recently, various factors have converged leading to a marked increase in the use of tax-deferred exchanges as an alternative to outright real property sales. Two of the principal factors resulting in the current popularity of tax-deferred exchanges are the increase in the maximum capital gain rate and the practical implications of the legal decision in Starker v. United States. Although simultaneous exchanges had been employed for a long time, the landmark Starker case opened a window of opportunity for valid exchanges on a nonsimultaneous basis.

Understanding Tax-Deferred Exchanges of Real Estate

The concept of tax-deferred exchanges is quite simple: If one trades property for like-kind property and does not receive any cash or other non-like-kind property, then no profit has been made, and there are no immediate tax consequences. While the basis in the replacement property is affected, any gain is deferred until the eventual sale of the replacement property.

Tax-deferred exchanges of real estate and personal property have been recognized by the I.R.C. since the 1920s, and regulations introduced in 1991 made structuring such transactions easier.