Defer Your Land Sale into 2010 Today
My partner Scot and I have a 1031 exchange company that handles many tax-deferred exchanges each year. About this time of year I like to remind our clients that they may be able to sell their land or real estate for cash, yet defer paying the tax on the sale until 2011.
Here is how it works.
1. Starting around July 4 or each year, you can sell your land for cash to a buyer. You enter into a tax defer exchange agreement with a qualified company. The money from the land sale will be parked at this company.
2. You have up to 45 days to identify your property. By this date, make sure to identify at least one or two properties that you would like to buy.
3. After the 45 day date, you have an additional 135 days to purchase this identified property. This adds up to a total of 180 days. If you close the sale after about July 3, this 180 date will be in early 2010.
4. If you are unable to purchase your replacement property, then the company holding your funds will refund it to you.
Under this scenario, this qualifies for an instalment sale treat. This means that the case you receive in 2010 will be reported on your 2010 tax return and the tax will be owed either March 1, 2011 or April 15, 2011.
If you had a lot of debt paid off at the time of sale, this may not result in much of a tax reduction since that is considered paid off in 2009.
I will update you over the next several months on other ways to save money with tax deferred exchanges.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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