Eleanor Breezy decided that rather than have an investment rental property in town, she’d get one at the beach so she could use it 14 days out of the year and have fun at the beach. After all she was at 32 still young, still beautiful and divorced without children. She got the rental property and her house in the divorce. She consulted her accountant about the tax impact of selling it. He told her that she was going to get hit pretty hard with taxes because her ex had depreciated down to nothing prior to giving it to her in the divorce. He suggested that there was something called a like kind exchange and that she should consult an attorney for the specifics. She went to see a real estate attorney, Geoffrey Dunder. Mr. Dunder agreed that a like kind exchange would work for her and that he could act as intermediary and paper the transaction. He went through the usual discussion of the identification rule of 45 days and the settlement rule of 180 days. She put her property on the market and started looking for her dream beach house. She immediately got a contract for the rental property from a nice couple with two kids and a dog. She was very happy that the house would have a good owner. The contract called for settlement in 30 days, she bumped it up to 60 days to give her time to find the replacement property. Geoffrey made sure that the appropriate language was in the contract to permit the like kind exchange.

She found a darling cottage in Ocean City, New Jersey. It was perfect. She could rent it out, and use it 14 days in May and in September and still get prime rental dollars. It had a new kitchen with all the energy efficient and high end appliances. She put a contract down and the price was workable with the other sale and the settlement date tracked so that it would occur shortly after the other contract settled. She smartly kept the sale of other property contingency in the contract in case something blew up. The old property settled and one week later she settled on the new property. The paperwork was flawless and she did not recognize any taxes on the transaction.