What are the general guidelines to follow in order for a taxpayer to defer all the taxable gain?
• The value of the replacement property must be equal to or greater than the value of the relinquished property. • The equity in the replacement property must be equal to or greater than the equity in the relinquished property. • The debt on the replacement property must be equal to or greater than the debt on the relinquished property. • All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property. Q – When can I take money out of the exchange account? Once the money is deposited into an exchange account, funds can only be withdrawn in accordance with the Regulations. The taxpayer cannot receive any money until the exchange is complete. If you want to receive a portion of the proceeds in cash, this must be done before the funds are deposited with the Qualified Intermediary. Q – Can the replacement property eventually be converted to the taxpayer’s primary residence or a vacation home? Yes, but the holding requirements of Section 1
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