SELLING MULTIPLE RELINQUISHED PROPERTIES IN ONE EXCHANGE

A taxpayer may transfer more than one relinquished property within the same exchange transaction.  Some details for structuring this type of exchange are:

1. The identification period and exchange period are determined by the date of transfer of the first relinquished property
2. All replacement properties purchased prior to the sale of other relinquished properties in the exchange cannot be dependent upon proceeds from the later relinquished property sales; and
3. All relinquished properties sold within the same exchange transaction must all be owned by the same taxpayer.

For example, regarding item (b) above, the taxpayer could not purchase a replacement property on November 3rd, sell an additional relinquished property on December 12th, and use the proceeds from that sale to pay down any debt used to acquire the previous replacement property.  The taxpayer should either postpone the closing of the replacement property until after the sale of the additional relinquished property, or ensure there are additional replacement properties identified for purchase in the exchange.