First off… I am not an attorney. For your own protection, you have to do your own due diligence… I thought when I read your question, I completely understood what you were asking…. Based on the answers of the other’s, maybe I don't understand the question at all... Here's what I think you are asking... The 1031 exchange, IRS Tax Code 1031, is a way to re-invest the proceeds from the sale of an appreciating asset without suffering a taxable event. Any taxation is deferred until final liquidation, (theoretically, several exchanges later, when you are in a more favorable tax position.) The way you make sure that all of this comes together correctly, is to be sure to use the "Safe Harbor" of a 3rd party facilitator. If you use a registered 3rd party facilitator, the infernal revenue, views it in a totally different light, than if you try to do it yourself. If a registered facilitator is holding the funds, they (the IRS) assumes it is being facilitated correctly and they will pretty well leave you alone. Or so they say...? If you do it yourself, as I understand it, you are almost guaranteed an audit. With a 1031 Exchange, you have a maximum of 180 days to roll the proceeds of the previous "Items" (key verbiage), sale into a new, "Like Item", without a taxable event. (Item meaning real estate for real estate, airplane for airplane, numismatic coins for coins, gem stones for gem stones... etc.) If you exceed the deadline, this is treated as an incomplete 1031 exchange and a taxable event occurs. Just like there would have been, if you did not enter into a 1031 Exchange, back when you sold your interest in the Item in the first place. I am certainly not certified as a 1031 facilitator, but as I understand it, there is no minimum time limit to liquidate the proceeds. If you do that, the proceeds are treated just like they would have been treated if, you had not entered into the 1031 exchange in the first place. Short term, long term whatever your tax position was, at the time of the sale, it is treated the same as it would have been. I think what council may have been trying to say is, You cannot receive the proceeds from the sale prior to the 180 day timeline….. “Without a taxable event.”. Perhaps, council neglected to mention those last 4 words. Hmmm. Regardless, if you receive the proceeds at all… Before, during or after the 180 day timeline, it is treated as a taxable event. Even if you only receive a check and hand it over to a facilitator, without cashing it, that is viewed as “constructive receipt” and there is a taxable event. The other consideration is, what will the facilitator charge you for the “broken” exchange? They don’t work for free. Never dealt with a broken one??? Long answer, but I think this answers your question. Good luck.
