Where Form 4797 Exchanges 2022-2023

Instructions and Help about Where Form 4797 Exchanges

Welcome to 10:31 University I'm Paul Holloway today's topic is is it possible to do improvements on a replacement property that you have purchased so for example if you buy a property of lesser value than what you sold for can you use exchange dollars to improve that replacement property well it really depends but let's go over a couple situations where it does work and then where it may not work so what we're going to do is just assume that you sell a property for a million dollars that is the start of the 1031 exchange that is the relinquished property so those proceeds come to your qualified intermediary now you've identified a replacement property and let's assume that replacement property is valued at $600,000 so where it depends is if you actually take title to that replacement property at 600,000 that is your like-kind property you cannot use additional exchange dollars to improve a property that you already own but with a parking arrangement much like a reverse 1031 exchange if you have this replacement property part with the qualified intermediary and that intermediary holds it under a special-purpose LLC and they hold it as an eat which stands for an exchange accomodating titleholder you can actually within the allotted 180 day window you can actually work a draw request arrangement with your intermediary to have additional exchange dollars go towards capital improvements done to the property typically the improvements have to be real property improvements and they do have to be completed within 180 days they do have to actually be in service you can't just put materials in the garage and wait for the work to be done you have to actually have the work done within the 180 days to make it qualify so...