They have set regulation that make the name of the person that is tax compliant to appear on the property for identification purposes. Since he represents the person who buys the property and the holder of the title who will be responsible for filing the tax returns. As a matter of fact he will be the one to control the property. In some situations we also have companies that are owned by an individual who can also liaise with the property owner to buy the property and act on the full capacity of the property.
Besides, there is also another rule known as replacement rule. You should note that this rule can only operate within one hundred and eighty days after the closing of the first property. In addition, the property can also be bought and then replaced with the second property upon closing of the first property and the extension of exchangers return.
Apart from that post closing of the first property can be done within a period of 45 days. It acts as an allowance for the identification of either the accommodator or closing the entity address of the possible replacement of property. Another thing is that the owner of the property will still be allowed 45 days for the submission of the property for sale in situation where the replacement property is packed. For instance, we have three party rule which identifies any three properties regardless of their value. Besides, we also have two hundred percent rule which allows for the identification of four or more property as long as long as it does not pass two hundred percent of what has been sold. To conclude on this rule we have exemption rule which allows for the ninety-five percent of what is identified to be bought if its value of the item sold exceeds two hundred percent.
In addition, there is also trading up. This is a little bit challenging since it requires the net market value and the equity of the property must be equivalent or greater than the replacement property to push forward one hundred percent of the tax on the difference. On the hand the exchange needs to pay the tax on that difference between the market value and equity of the property. The difference is seen to the sense that additional equity can offset debts and vice versa is not true.
The necessities in 1031 exchange cannot be determined immediately due to the fact that there is no hold time. Some of the necessities will include determining whether the equipment was acquired immediately before the exchange time and others as well.
Another thing is that this rules only apply for investment or business property but not personal use. And this does not allow you to live your resident and shift to another place.