“Hi, I’m Cedric”. “I’m Ito Brassballs, what can I do for you?” “I’ve got this condo that I’m selling and I’m supposed to make about $475,000 in gains, and I heard that there’s something called a like kind exchange that can save me some taxes”, Cedric said matter of factly. “Is it an investment property?” the lawyer queried. “Yes”, Cedric answered. “Then, yes you can do an exchange for other real property. There are two types of like kind exchanges. A direct exchange which happens rarely these days because it so hard to match two people to swap property. The other is a deferred exchange in which you settle on the property, the money is placed in the hands of an intermediary and held in an escrow account. You have 45 days to identify replacement property and 180 days to settle on it, under the safe harbor under the regs”, Ito answered. “So let me get this straight, I settle on the property, go out and find new property, identify it to the Intermediary in 45 days, settle on it in 180 days?” Cedric repeated. “Yes”, there are a few other rules. The replacement property must not be purchased for personal use. You have to take on as much debt as you had on your previous property or recognize gain. In essence the purchase price has to exceed the purchase price of the property you’re surrendering”, as a rough rule of thumb. Also, if you get any cash you’ll owe tax on it. Your basis will only change slightly so you ae deferring the taxes not saving them. I can prepare an addendum to your sales contract”, Ito replied. “That would be great “ Cedric replied. After Ito told him all the fees involved, he prepared the addendum to the real estate sales contract.