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What happens if the taxpayer is in escrow to sell the relinquished property and then decides the want to make it part of a tax-deferred Exchange?

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What happens if the taxpayer is in escrow to sell the relinquished property and then decides the want to make it part of a tax-deferred Exchange?

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A. If the taxpayer actually or constructively received proceeds from the sale of the relinquished property, it is too late to enter a 1031 exchange. It is extremely important to note the taxpayer’s intention to make this transaction part of a tax-deferred exchange in the contract to sell the relinquished property. If the taxpayer has entered into a contract to sell, but has not closed, it may be possible to complete a deferred exchange, provided the taxpayer executes the proper exchange documents, identify the replacement property within the 45 day identification period, and actually receive the replacement property within the 180 day exchange period, or before the taxpayers tax return is due. Seeking the advice of your attorney or tax advisor can help you to make that determination.

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