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176. Does an Installment Sale Defer the Tax on Recapture of Accelerated Depreciation? No. Can the Tax on Recapture of Accelerated Depreciation Nevertheless Be Deferred When an Installment Sale Occurs? Yes.
162. Transfer a Family Business to the Next Generation During the Parent's Lifetime, Retain an Asset for Income, Give the Transferee a Stepped-up Basis, Defer the Gain on Sale, Support the Parent with Deductible Rent, and Finance the Transaction, Too
May 20, 2013
I am aware that it happens all of the time, but that makes it more egregious, not less. It’s said that there is safety in numbers. Well, there is tragedy in numbers, too—and that’s what it is, when day after day, week after week, month after month, and year after year 1031 exchanges fail and the would-be exchangors have to pay the tax immediately rather than defer it.
A couple of weeks ago an attorney who shall remain infamous advised his client not to accept installment payment of the money the accommodator was holding when the 45-day period ended without identification of a potential replacement property. That advice cost his client millions.
That advice was given in spite of the fact that the Treasury’s 1031 Regulations explicitly state that when the accommodator pays that money to the exchangor after the year in which the exchangor relinquished property, the payment then falls under Section 453 (the installment-reporting section) rather than under Section 1031 (for tax-deferred exchanges).
What justification is there for such malpractice?--Stan Crow
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The Latest Installment addresses situations, questions and issues which are brought to us in the course of the consideration, negotiation or execution of transactions. We don't use the real names of parties to transactions, and we may edit the statement of the question to try to tell the story better. Please feel free to comment, or to take issue, or to raise your own question or situation. If you do the latter, please do not relate any confidential information.
The Latest Installment blog is edited by Stanley D. Crow, who is president of S.Crow Collateral Corp.