WHAT RESTRICTIONS APPLY TO EXCHANGES INVOLVING RELATED PARTIES?
The Revenue Reconciliation Act of the 1989 Legislative session effected a two year related party restriction wherein property conveyed to a related party is now subject to a two year holding period. If either the exchanger or the related party disposes of the acquired properties within the two year period, the non-recognition provisions will not apply and the exchanger must recognize gain as of the date the disqualifying disposition occurs. A related party is defined by cross reference to I.R.C. Section 267(b) which covers a wide range of relationships including family members, corporations, partnerships and trusts.
