With homes in the Desert Ridge area of the North Phoenix Arizona real estate market being in such high demand, investors should understand clearly, how 1031 exchange transactions work and what the requirements are for investment real estate buying and selling.
From an audit perspective, State and Federal taxing authorities continue to place focus on 1031 exchanges as a subject to top audit issues; this fact has been confirmed through reports by the Franchise Tax Board of a many large states.
Some of the items these State and Federal taxing authorities are paying particular attention to include the following:
- Taxpayer receives cash or other property (boot) in the exchange but does not report the boot on their return.
- Taxpayers do not meet identification or other technical requirements of IRC Section 1031.
- Relinquished and/or replacement property are not held for investment or for productive use in a trade or business (i.e. property is used for personal purposes or is held primarily for sale).
- The taxpayer who transfers relinquished property is a different taxpayer than the party who acquires replacement property.
The good news is that all of these potential issues with Phoenix Arizona 1031 exchange transactions can easily be avoided by ensuring that your 1031 exchange is handled correctly, also making sure to meet the required timeline events.
Contact your CPA and/or tax advisor to find out all the 1031 exchange requirements for Phoenix Arizona real estate transactions and then contact us so that we can help you properly plan the exit of your current investment property, and meet the deadline requirements for identifying your next investment property purchase.