(Insert address)
Owen Wilson,
Director-Wilson Enterprise,
P.O BOX-4050-99-30,
Washington DC.
Dear Sir,
RE: SALE OF PART OF YOUR HAY FIELD TO YOUR BROTHER LUKE.
I am writing to you this letter to bring to your attention the existing rules of the land (US LAWS) that governs the intended sale of your property to your brother Luke. Under section 1031, of the property exchange laws, like-kind exchange method is described. In this section, like-kind exchange is the process of deferring your tax payment when you sell your property, so long as you meet the IRS conditions. The conditions are as stated below. First is that for you to qualify for like-kind exchange, both parties, that is, your brother Luke and you must agree to give off the properties that you want to exchange. But since you are not sure if your brother is willing to give out his tractor or his store house in exchange with part of your hay field, we cannot involve that part of the law since both of you are not yet reading from the same script. Thus, our option, one of exchanging your hay field with either your brother’s tractor or his store house is dropped at this point.
Were this first desire to work, section 1031 of the exchange rules would require you to receive the required property from your brother within 180 days from the day of agreement and give out property you are selling within 45 days from the date of the signed agreement. However, you qualify for part of the law since both properties to be exchanged are commercial enterprises as per the requirement of section 1031 on like-kind exchange, but we dare not invoke this law since we are wanting in other parts.
With regards to the exchange laws under the title OcMulgee Fields, Inc.v. comm., 106AFTR 2d 2010-5820, it is only possible to transact a tax-free property exchange with your brother if both of you agree to wait for a minimum of two years from the time of the exchange agreement in order to successfully effect the exchange and dispose your property. This condition comes into play if both parties involved in the exchange are related, in which case, you and your brothers.
Concerning the property exchange law under the title Rev. Rul. 2002-83, it denies deferment of taxes to an individual who is exchanging a property to a relative. However, this rule allows the incorporation of an intermediary in order to do a successful property exchange that will be tax-free. The ruling states that such a transaction is only possible if the third party (an intermediary), receives cash or any other property which is non-like-kind property. This rule requires four players in your case in order to succeed. First is you (Denoted by A in the explanation that follows), your brother Luke (Denoted by B), a third Party who is also interested in your property, but has cash (Denoted by C) and a Qualified intermediary (QI).
The above rule states as follows; A is in need of Tax deferral under section 1031 of IRC, B is a relative to A and wants his property, C also wants A’s property, then A must transfer the property to QI first, the QI will sell it to C in cash, the QI acquires B’s property and pays it in cash using the amount from C, QI finally delivers B’s property to A and A’s property to B. In this way, A will own a tax- free property.
In conclusion, the first and the second cases will not work for you since they involve a long period of waiting for the deal to mature, in addition to the reasons given in each section above. Thus the last rule in this letter, that is, Rev. Rul. 2002-83 fits well in your situation and I implore you to pursue it in order to own a tax-free property after the exchange.
Thanks.
(Insert signature)
