Question

2. Philip wants to sell his rental beach home and purchase rental property in the mountains. H friend, Randy, tells him he can do a nonsimultaneous tax-free exchange as long as the fair marka value of mountain property is equal to or greater than the fair market value of the beach propert How long after selling his beach property does he have to identify and purchase the mountain property? a. The mountain property must be identified within 45 days of the closing of the beach property and must be closed within 180 days of the closing of the beach property b. The mountain property must be identified within 30 days of the closing of the beach, property and must be closed within 120 days of the closing of the beach property c. The mountain property must be identified within 60 days of the closing of the beach property and must be closed within 180 days of the closing of the beach property d. The mountain property must be identified within 90 days of the closing of the beach property and must be closed within 180 days of the closing of the beach property,

Answer 1

Yes, Philip can escape from tax that is he can defer his tax liability, if he purchase another rental property after selling the current rental property, which are both in the same lines as per section 1031. Therefore, as long as the new property fair value is greater than the old property one, Philip can get the benefit, but there are certain time limits prescribed by section 1031 to get benefit, which is as follows,

Philip have 45 days from the date of the sale to identify potential replacement properties and you must close on the replacement property within 180 days. If your tax return is due before that 180-day period, you must close sooner. Miss the deadlines and you will have to pay taxes on the sale of the original rental property.

Therefore the answer is a.