Prior to the repeal of IRC 1034, taxpayers could defer the tax on the sale of their principal residence by replacing the residence with a new principal residence within 24 months of selling the old one. No Exchange was required. However, in May of 1997, IRC 1034 was repealed in its entirety and replaced with the following general provisions under IRC 121. Under the new provisions, there is no requirement for a rollover into a new principal residence. These changes will eventually eliminate some of the confusion between the repealed principal residence rollover provisions and an Exchange.
Exchanges require two parties who want each other's properties.
The parties often do not know each other, and their properties may even be located in different states. The like kind requirement limits a taxpayer's options. But like kind simply means that real property must be Exchanged for real property. In an Exchange, title to the Exchanged properties must pass simultaneously. However, the replacement property must be received by the taxpayer within 180 days after closing on the relinquished property.