5) WHEN IS A 1031 TAX-DEFERRED EXCHANGE APPLICABLE?
It is applicable when the property in question falls within the "like kind" definition and the principal intends to BUY another property of "like kind" within 180 calendar days following the close of escrow from the SALE, and when the Investor has a recognizable gain.
Remember, under the delayed exchange parameters, there is a maximum of 180 calendar days to purchase replacement property.
If the principal is not sure prior to closing the sale property, it is a good idea that the transaction is structured as an exchange rather than a sale. Otherwise, if the escrow is closed without the exchange protocol in place, the principal will have receipt of proceeds and cannot perform an exchange. If the exchange is "set up", the principal has the option of deferring taxes.
