1033 Exchange - Spidell

1033 Exchange

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Message Board 1033 Exchange

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      An S corp had a Section 1033 involuntary conversion to sell its commercial property for $3m ($30k basis) and is purchasing a replacement property to complete the tax deferred exchange.  Before purchasing the replacement property, the corp will redeem 60% of its stock from two shareholders for $1.8m and the remaining 40% shareholder will become the sole owner.  Can the corp reinvest only 40% of the sale proceed ($3m*40%=$1.2m) per remaining shareholder’s original ownership without recognizing any gains? Or the corp still needs to acquire a $3m replacement property for a tax-free exchange?

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