Agent

The pitfalls of property exchanges

Financial, business risks stir concerns

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...