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State Rules Regarding 1031 Exchanges
While Section 1031 is part of the United States
Internal Revenue Code (IRC), it is important to know whether the same rules
apply to state taxation for those states that have income taxes.
Some states just piggyback their tax laws on the
IRC; while others have their own completely separate rules.
In addition, some states also have different
rules, including special tax withholding requirements, applying to sellers of
in-state properties who are not residents of those states. To ensure a
smooth 1031, it is critical to review these rules well before a deal is
scheduled to close to ensure that the proper amount of, or no, taxes are
withheld from the disposal leg of the exchange.
The following information is not intended to be
an all encompassing recap of all of the rules for every state. Before
embarking on a 1031 exchange, make sure you and your tax advisor have reviewed
the rules for both your home state and the state in which the property is
located. You can reach the web sites for all of the different State tax
agencies via
SisterStates.com
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