This is, of course, logical, because then the exchange is disqualified anyway.

One situation requiring extra care occurs when exchange property, either relinquished or replacement, has mixed characteristics, being partly like-kind and partly non like-kind. Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. It is important for a taxpayer to understand what can result in boot if taxable income is to be avoided. As explained below, common stock may or may not include ditch stock which is sold with farm land.

Another rule of thumb is that cash boot received by the taxpayer will not be considered offset by debt incurred by the taxpayer. Multiple tenants each with separate leases managed by professional management. Taxpayer identifies replacement propertyies on or before the 45th day after transfer of relinquished property. Almost any type of income or investment real property may be traded for another type of income or investment real property. In this example, nonrecognition allows the taxpayer to acquire an apartment building, instead of a duplex.

The simplest form has been the simultaneous exchange, illustrated above. In May 1977, a federal trial court ruled against Starker, and Starker appealed. Again, this is an area where the taxpayer should obtain the advice of a qualified tax advisor.

If no identification is made within the identification period, then the taxpayer can cash out. Following these rules may require the additional expense of obtaining appraisals. Here, the taxpayer locates and identifies replacement property, which the trading partner will purchase and cause to be deeded to the taxpayer. However, real property in the United States and real property outside the United States are not like-kind properties. Likewise, the Regulations allow the taxpayer to take a standby letter of credit, or a third party guarantee, to back the intermediary's performance. Big T Water acquired with farm land possible issue. Moreover, the taxpayer never handled any cash in the course of the transactions. This form has always been recognized as qualifying for nonrecognition treatment under § 1031, hence the green light depicted.