Question 1

A taxpayer owns a rental property with a basis of $100,000 and FMV of $500,000. They want to exchange it for another rental property worth $500,000 to defer gain. They identify the replacement property 50 days after the sale of the relinquished property. Does this qualify as a Section 1031 exchange?

Accepted Answer

1. Identify 1031 Deadlines:
- Identification: 45 days.
- Receipt: 180 days.
2. Fact: Identified on day 50.
3. Result: Fails 45-day rule. Exchange is taxable.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Confusing the 45-day ID period with the 180-day closing period.

A taxpayer owns a rental property with a basis of $100,000 and FMV of $500,000. They want to exchange it for another rental property worth $500,000 to defer gain. They identify the replacement property 50 days after the sale of the relinquished property. Does this qualify as a Section 1031 exchange?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA TCP Practice Exam

More questions from this exam