Value & Equity Requirements

Want an easy way to know if you satisfy the requirements of your exchange? Welcome to the Napkin Test. The Napkin Test was literally conceived on a napkin at a seminar by California tax attorney Marvin Starr of Miller, Starr and Regalia. It’s a simple exercise to determine the potential for exposing taxable assets or “boot” in an exchange. The Napkin Test compares the values of the relinquished and replacement properties.

You may offset mortgage boot with cash, but you cannot offset cash boot with additional mortgage. Boot is “unlike” property received in an exchange. Cash, personal property, or a reduction in the mortgage owed after an exchange are all potentially boot and subject to tax.

Although it doesn’t replace a detailed exchange recapitulation worksheet, the Napkin Test can quickly and easily assess an exchange and any potential for boot. Tune in below as we walk through examples, and how use them in our video update!

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Timeline Requirements

Measured from when the relinquished property closes, the Exchangor has 45 days to nominate (identify) potential replacement properties and 180 days to acquire the replacement property. The exchange is completed in 180 days, not 45 days plus 180 days.

The sooner you involve the team of professionals at Equity Advantage in your 1031 exchange, the better. They’re seasoned experts who know all the ins and outs of this complicated transaction. Call them at 503-65-1031 and protect your investments!