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Concepts and Mechanics of Exchanges (Course Id 231)

QAS / Registry / EA   Add to Cart 
Author : Danny C Santucci, JD
Status : Production
CPE Credits : 16.0
IRS Credits : 16
Price : $125.95
Passing Score : 70%
Course Type: NASBA QAS - Text - Technical - NASBA Registry - IRS Enrolled Agents
Primary Subject-Field Of Study:

Taxes - Taxes for Course Id 231

Description :

While tax reform visions have changed the tax on profits realized from the disposition of real estate, investors still seek escape hatches from the capital gain tax. Tax-deferred exchanges permit the disposition of property often with the taxpayer receiving significant cash but without the payment of any tax. Functionally, an exchange is a bridge over the normally taxable event of moving from one property to another. This course alerts the practitioner to the different planning opportunities that surround exchanging. Participants will be able to identify, analyze, and handle effectively the complex tax problems that arise under 1031. This understanding will be directly applied to the structuring and audit survival of multi-party and delayed exchanges.

Usage Rank : 0
Release : 2020
Version : 1.0
Prerequisites : General understanding of federal income taxation.
Experience Level : Overview
Additional Contents : Complete, no additional material needed.
Additional Links :
Advance Preparation : None.
Delivery Method : Self-Study
Intended Participants : Anyone needing Continuing Professional Education (CPE).
Revision Date : 17-Jun-2020
NASBA Course Declaration : Participants must complete the final examination within one year of purchase and with a minimum passing grade of 70% or better to receive CPE credit unless otherwise noted on the Course History page (i.e. California Ethics must score 90% or better). After logging in click on the Course History links on your My Courses page for the Begin date and Expire date for the Final Exam.
Approved Audience :

NASBA QAS - Text - Technical - NASBA Registry - IRS Enrolled Agents - 231

Keywords : Taxes, Concepts, Mechanics, Exchanges, cpe, cpa, online course
Learning Objectives :
    To view Learning Objectives, please Click here.
Course Contents :

Chapter 1 - Introduction - §1031

Taxes & Exchange Popularity


Tax Reform Act of 1986

Later Tax Legislation

Impact & Summary

Exchanging vs. Installment Sales

Tax Reform Act of 1986

Revenue Act of 1987

Continuing Problems

Disposition of Installment Note

Stepped-up Basis on Death

Related Parties

Security Issues

Exchange Benefits

Chapter 2 - Section 1031 & its Function

Code Language

Section 1031 as an Exception to General Rule of Taxation

Concept of Tax Deferral

History of Provision


Continuity of Investment

Administrative Convenience

IRS Position

Mandatory Application

Chapter 3 - Statutory Requirements and Definitions

Qualified Transaction - Exchanges v. Sales

Definition of an Exchange

Contractual Interdependence Test

Integrated Plan Test


Intent of the Parties

Held for Productive Use or investment


Productive Use

Retired Property

Investment Purpose

Use by Relatives

Vacation Homes

Moore Decision

R.P. 2008-16

Change in Property’s Character

Conversion of Personal Use Property


Pre-Existing Plans & Contracts

Acquisition Purpose

State of Mind Concept

Focused Analysis - Taxpayer-By-Taxpayer Application

Combining Qualifying Use

Section 1034 Confusion

Same Taxpayer Requirement

Caselaw & Ruling Developments



LTR 199911033

Property Exclusions & Restrictions under §1031

Former Statutory Exclusions - Old §§1031(a)(2)&(j)

Stock In Trade or Other Property Held Primarily For Sale

Property Held Primarily for Sale

Question of Intent

Dealer Issue

Stocks, Bonds or Notes

Other Securities or Evidences of Indebtedness or Interest

Interests in a Partnership

Existing Partnerships

1991 Final Regulations

Certificates of Trust or Beneficiary Interests

Choses in Action

Real Property Only Restriction - §1031(a)(1)

Like-Kind Property

Nature or Quality of Property

Qualified §1031 Exchange of Personal Property Repealed

Requirements for Personal Property - Prior to 2018

Like-Kind Requirement for Personal Property

Like-Kind Personal Property - Identical

Like Class Personal Property - General Asset or Product Class

Five, Four, Then Six Digit Product Classes

Property Held for Investment

Other Personal Property

Multiple Asset Exchanges

Exchange Groups

Aggregation & Allocation

Residual Group


Real v. Personal Property

State Law


Land vs. Improvements

General Rules


Chapter 4 - The Concept of “Boot”

Partial Tax-Deferral

Examples of Boot

Realized and Recognized Gain

Realized Gain

Recognized Gain

Limitation on Recognition of Gain under §1031

The Definition of “Boot”

Chapter 5 - The Rules of “Boot”

Property Boot and Mortgage Boot

Property Boot

Mortgage Boot

Debt Relief

Debt Relief Is the Equivalent of Cash

Liability or Notes Created During the Exchange

Netting “Boot” - The Rules of Offset

Property Boot Given Offsets Any Boot Received

Mortgage Boot Given Offsets Mortgage Boot Received

Adjustments to Mortgages during Exchange

LTR 9853028

Mortgage Boot Given Does Not Offset Property Boot Received

Biggs Case

Behrens Case

R. R. 72-456 & Commissions

Non-Deductible Closing Costs

Permissible Trade Down

Affect on Basis

Net Taxability of Gain

Comment on Alternative Offset Rules

Chapter 6 - Losses in an Exchange

Like-Kind Property

Non-Like-Kind Property Given

Chapter 7 - Basis on Tax-Deferred Exchange

Adjustments to Basis

Allocation of Basis

Anti-Churning Rules

Under ERTA

Under TRA ‘86


Property Placed in Service Prior to 1981

Property Placed in Service from 1981 Through 1986

Chapter 8 - Depreciation, Cost Recovery, Macrs and Recapture


TRA ‘86 & OBRA ‘93

IRS Depreciation Guidance - Notice 2000-4 & Regs


Land vs. Improvements

New Allocation on Exchange

Recapture of Depreciation

Section 1245

Section 1250

Recapture Property

Exchange Impact

Recapture Exceptions Prior To ERTA

§1250(d) Exception

§1245 (b) Exception

Issues after ERTA

TRA ‘86

Allocation of Basis When Recapture Applies

Investment Credit Recapture - Long Gone

Chapter 9 - Miscellaneous Exchange Aspects

Holding Period

Strict View

Treatment of Gain or Loss

Installment Sales Reporting

Treatment Prior to 1980

Treatment After 1980



Exchanges between Related Parties

Two-Year Limitation

Related Parties

Special Holding Period Rule


Avoidance Exception to §1031

Sections 267, 707, 453, & 1239


Splitting Partners

Reporting an Exchange

Schedule D & Form 4797

Form 8824


Chapter 10 - Exchange Mechanics


Meeting the Napkin Test


Figures for Computation

Economic Balance & “Evening Out”

Balancing Multiple Party Exchanges

Examples of Balancing Multiple Party Exchanges

Locating Boot

Finding Exchange Property

Trade-Up Rule

Exchange Groups


“Coleman” Solution

Wrap-Around Mortgage

Tax-Free “Cash Out”

Chapter 11 - Types of Exchanges

Two-Party Exchanges

Variation #1 On Two-party Exchanges

Three-Property-Plus Exchanges

Variation on Three-Property Exchange

Three-Party “Alderson” Exchange

Variation #1 on Three-Party “Alderson” Exchange

Variation #2 on a Three-Party “Alderson” Exchange

Variation #3 on Three-Party “Alderson” Exchange

Variation #4 on Three-Party “Alderson” Exchange

Three-Party “Baird Publishing” Exchange

Variation #1 on Three-Party “Baird Publishing” Exchange

Variation #2 on Three-Party “Baird Publishing” Exchange

Four-Party Exchanges

Four-Party “Coupe” Exchange

Four-Party “Mercantile Trust” Exchange

Chapter 12 - Delayed Exchanges

Delayed Exchange vs. Delayed Close

Chaos Factor


Old Main Stream Formats

The Rising Star - Delayed Exchanging

Care in Execution

Starker Case


Starker II



TRA ‘84

45-Day Rule

Method of Identification

180-Day Rule

Pre-existing Exchanges

Holdover Issues after Tax Reform

Format & Structure

“Starker” Trust

Intermediary Format

Acceptance of Notes on Exchangor’s Property

Security for Performance - Use and Control of Cash

Performance Deed of Trust

Third-Party Guarantee or Letter of Credit



Encumbered Property and Immediate Mortgage Relief

Open Transaction Theory

“Sale-in-Lieu” Provision

Delayed (Deferred) Exchange Regulations

Final Regulations

Effective Date

Deferred (Delayed) Exchange Definition

“Reverse-Starker” Transactions

Identification Requirements

Identification & Exchange Periods

Application of §7503

Method of Identification

Property Description

Incidental Property - 15% Rule


Substantial Receipt

Multiple Replacement Properties

Actual & Constructive Receipt Rule

Four Safe Harbors

Safe Harbor #1 - Security

Safe Harbor #2 - Escrow Accounts & Trusts

Disqualified Person

Who Is An Agent?

Safe Harbor #3 - Qualified Intermediary

Who Is A Qualified Intermediary?

Direct Deeding


Simultaneous Exchanges

Safe Harbor #4 - Interest

Interest Reporting - §468B(g)

Restrictions On Rights to Money & Other Property - “g(6)” Limitations

Outside Transfers of Money or Other Property

Delayed Exchange Agreement

Chapter 13 - Warehousing & Pot Method


Reverse Exchanges - R.P. 2000-37

R.P. 2004-51

The Pot Method


Chapter 14 - Accommodators & Intermediaries

Sale & Lease-Back

Chapter 15 - Calculation Sheets



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