IRS Tax Deferred Exchange 1033

by kevinjones on September 9, 2014

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IRS Tax Deferred Exchange 1033 by Kevin Jones, Realty Professionals 805-473-0300

Realty Professionals 805-473-0300

The IRS tax code 1033 is less prevalent than the more common 1031 exchange. The 1033 is usually referred to as an “Involutary Conversion” and used when an investment property has been destroyed in whole or part from theft, seizure, requisition, condemnation, threat or imminence by compulsorily or involuntarily converted or acquired. The client we are working with currently, their property(s) are be acquired through eminent domain where the Government seizes the property for their purposes, in this case the new bullet train and negotiates a settled price with the owner. For more information click this link.

IRS a 300x204 IRS Tax Deferred Exchange 1033

Realty Professionals 805-473-0300

This tax code dates back to 1921 and the unique thing about this exchange is that you are not required to use an accomodator as an intermediary to hold the conversion proceeds. The two most common uses under the 1033 is destruction and eminent domain. The courts have been rather generous over the years in determining whether a replacement property is similar and/or related in the service or use to a converted property, so it is best to check with your tax advisor, financial planner or CPA prior to proceeding with a replacement property acquisition.

IRS building1 300x224 IRS Tax Deferred Exchange 1033

Realty Professionals 805-473-0300

Condemned property or properties sold pursuant to a threat of eminent domain which is used in a business or trade or held for investment can be replaced with like-kind replacement property applying the similar standards afforded to 1031 exchanges but the 1033 is more restrictive and limited to “Similar in Use” type properties. For more information on this please click here for the link. Because 1003 exchanges are not quite as common and each property and owners situation vary it is best to review the details with your financial planner, tax consultant and/or CPA to determine what is the proper type of replacement property before looking. More info here.

Realty Professionals 805-473-0300

It is crucial that the investor work closing with their CPA or accountant to ensure they comply with the specific requirements of a §1033 exchange. A Qualified Intermediary is not necessary to effectuate a §1033 exchange.

Realty Professionals, does not provide advice regarding specific tax consequences nor legal advice. Investors considering a §1031 or §1033 tax-deferred exchange should seek the counsel of their accountant and attorney.