Like kind exchange

[MargaretMort]

First of all, let me tell you that I have never had occasion to deal with a like-kind exchange. Because of personal problems, I am looking for help to be sure I understand what I have read and do understand. So here goes:

A client bought a lot as an investment. She recently sold it and wants to know if she can put the money into a house in another state with no taxable cost. My understanding is that yes, she can, as long as the house is an investment and not for personal use. Before I put my foot in my mouth and tell her this, I need to be sure in what is left of my mind that I am not giving her the wrong advice.

Any and all help is most appreciated. MM

[jainen]

>>She recently sold it<<

A 1031 exchange involves trading only PROPERTY for PROPERTY. That's where the "like-kind" comes in. Since your client has already sold her lot, she no longer has any property to trade. Instead, she has money to buy new property.

It is common to use an intermediary to buy the replacement property and then complete the trade. That must be arranged ahead of time; it's too late now. The sale was taxable.

[MargaretMort]

I knew there was something missing in my thinking. Thank you, Jainen. Hopefully my brain will return to semi-normal soon. MM