Agent

The pitfalls of property exchanges

Financial, business risks stir concerns

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With the number of bargain properties now on the local real estate market, you would think both investors and owner-occupants would be racing to take advantage of attractive deals. While many potential homeowners -- especially first-time buyers attempting to beat the Nov. 30 deadline and take advantage of the $8,000 federal tax credit -- have re-entered the market and have made compelling offers to purchase Puget Sound homes, investors have been reluctant to capitalize on reverse tax-free exchanges. Nine years ago, the federal government enhanced 1031 delayed exchanges that allow taxpayers to defer the capital gains tax on an investment property if they purchase a "replacement" investment property of equal or greater value within specific time frames.The enhancement, Internal Revenue Procedure 2000-37, permits the title to the "replacement" property to be held by an independent third party (typically a facilitator or attorney) until the "old" p...