CFP

Tax Consequences - Related Party Transactions

Related Party Transactions

Related Party Two-Year Rule:
Under Section 1031(f), like-kind exchanges are allowed between related parties, but they can lose their tax-free treatment if either party disposes of the property received from the exchange within two years after the date of the transfer.

Who qualifies as related parties?
Parents, brothers, sisters, children, grandparents, more than 50% ownership in a corporation or partnership and a trust in which you are a beneficiary. The two-year rule does not apply to spouses (unless they are a non-resident alien).

Exception: Death or involuntary conversions.


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