Exchange Lets You buy, Sell Tax-Free

  Question: Our family has owned 40 acres of farmland in Buckeye since the 1940s. The market for farmland in Buckeye is improving and we should make a substantial profit if we sell. We have been told by our CPA that we should sell this land and then buy shopping-center land for long-term development near the football stadium in Glendale. We are concerned, however, about paying a large amount of taxes if we use the money. We also have been told by our CPA that we can sell the Buckeye land and buy the shopping center land in Glendale without paying taxes. Is that true?

  Answer: You have been told by your CPA about a “Starker” exchange, which is a delayed tax-deferred exchange of properties. In general, in a “Starker” exchange you can sell your Buckeye farmland, and within 45 days designate up to three parcels of Glendale shopping-center land as your like-kind exchange property. If you close on the purchase of any parcel of Glendale shopping-center land within 180 days after the sale of your Buckeye land, you should be able to defer any taxes on the capital gain made on the sale. You are not allowed, however, to have access to the sale proceeds from the sale of the Buckeye land. You must retain a Qualified Intermediary to receive the sales proceeds, then the QI will use these sale proceeds to buy the parcel of Glendale land. Most title companies have companies that can act as a QI. Your CPA or your attorney also should be able to give you the names of companies that can act as a QI.