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If you have ever dealt with a 1031 Exchange, you are familiar with the 180 day term. If you have not, the basic gist is as follows:
A person selling real estate can roll over the proceeds into a new like-kind investment and defer taxation on the gain, but the replacement property needs to be identified within 45 days of sale, and the investor needs to take ownership of the new property within 180 days after the sale.
The Mortgage Meltdown/Credit Crisis/Credit Crunch/Subprime Meltdown/whatever you want to call it has officially sucked the 1031 market into its vortex, and according to the 10/19/07 Kiplinger Tax Letter, the IRS is considering soft enforcement of this 180 day rule. 1031 Exchanges involve an ‘intermediary’ to handle the exchange, and because so many of these entities have gone into bankruptcy, the cash involved in the exchanges has been tied up in court, hampering the ability of the investors to settle within 180 days.
In previous cases where an intermediary caused such a delay, the IRS claimed they were powerless to extend the deadline. This current attitude may be reflective of a ‘bail-out’ friendly attitude in various parts of our government.
Please consult your tax advisor for more specifics, or contact me if you need a referral to one.