Question 1

How do Florida-specific considerations affect 1031 exchanges?

Accepted Answer

FL considerations: no state income tax (Florida does not impose a state income tax, so there is no state tax deferral benefit; the 1031 exchange defers only federal capital gains tax), documentary stamp tax (Section 201.02: Florida documentary stamp tax is due on the deed when the replacement property is acquired in Florida), and property tax (the replacement property’s assessed value starts fresh; the Save Our Homes cap from the relinquished property does not transfer to the replacement property).

Question 2

What types of Florida property qualify for a 1031 exchange?

Accepted Answer

Qualifying property: the property must be held for investment or business use (not personal use). Qualifying: rental properties, commercial buildings, vacant land held for investment, agricultural property, and industrial property. NOT qualifying: the taxpayer’s primary residence, vacation homes used primarily for personal use (however: a vacation home that is rented for 14+ days per year and personal use is limited may qualify under specific IRS safe harbor rules), and property held primarily for sale (dealer property).

Question 3

What is a reverse 1031 exchange in Florida?

Accepted Answer

Reverse exchange: the taxpayer acquires the replacement property BEFORE selling the relinquished property. This is more complex: an Exchange Accommodation Titleholder (EAT) holds title to the replacement property (the taxpayer cannot own both properties simultaneously), the taxpayer has 45 days to identify the relinquished property (from the date the EAT acquires the replacement), and the exchange must be completed within 180 days. Reverse exchanges are more expensive (due to the EAT’s involvement and additional legal and holding costs) but are useful when: the replacement property is available now and the relinquished property has not yet been sold.

Qualified Intermediary in 1031 Exchange

1031 Exchange QI in Florida

FL-Specific

Qualifying Property

Reverse Exchange

Related Terms

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