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Should You Put
Your Family Member
on the Payroll?
Accounting for
Computer Software
Costs
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"K" transferred two rental properties, hoping to avoid capital gains tax
on the transaction by replacing the properties in a qualifying "like-kind
exchange." Since the exchange was not simultaneous, "K" had a couple
of tax law deadlines to meet. First, he had to identify suitable replacement property on or before 45 days after the transfer.
Second, he had to actually receive the replacement property within 180 days after the transfer (or, if earlier, his tax return's due date with extensions).
"K" met the first deadline. But he didn't receive one of the replacement properties on time because the seller cancelled the sale one day before closing.
The Tax Court refused to extend or waive the second deadline even though "K" had made a good faith effort to comply with the rules. Therefore, "K" had to recognize the capital gain.