Are there safe harbor provisions that provide guidance for 1031 Deferred Exchanges?
The 1991 Treasury Regulations for Tax-Deferred Exchanges under IRC Section 1031 establish four “safe harbors”, the use of which allow a taxpayer (Exchange Party) to avoid actual or constructive receipt of money or other property for purposes of completing a Section 1031 exchange. Although an Exchange Party will not automatically be deemed to have constructive receipt of Relinquished Property sale proceeds if the safe harbor requirements are not met, compliance with the safe harbors should satisfy even a conservative tax advisor. The four safe harbors include: • qualified intermediaries, • interest and growth factors, • qualified escrow accounts and qualified trusts, and • security or guaranty arrangements. These safe harbors may be used singularly or in any combination as long as the terms and conditions of each can be separately satisfied. The first 3 of the safe harbors require the exchange agreement between the Exchange Party and the Qualified Intermediary to expressly limit the Exc
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