Reinvestment Requirements

  • Real property that is sold must be replaced with real property.  The value of what is bought must be equal to or greater than the value of what is sold, less the Real Estate Commission.  The proceeds from the sale of the Relinquished Property must be re-invested into the new property rather than sold for cash.
  • If any proceeds are left over or used for other purposes, they are considered a gain or referred to as “Boot” and are subject to taxation.  If this is the case, the transaction is a partial Tax-Deferred Exchange.  You must exchange for “Like-Kind” property and acquire property with loans, equity, and sales price which are equal or greater than the property exchanged.

Example: