If I follow the 1031 rules, can they disallow my exchange...?

If I follow all the 1031 rules, can the IRS still disallow my exchange...?

This should never happen, although a renegade auditor can do almost anything he wants. But if this were to happen, his superiors should quickly reverse his decision. That's because IRC §1031 is not a loophole, or a procedure that gets around a law. IT IS THE LAW; it is section 1031 in the Internal Revenue Code.

In the upcoming book, Rich Dad's Real Estate Advantages: Tax and Legal Secrets of Successful Real Estate Investors (Warner, Paperback, 288 pages), Gary Gorman writes,

"It's called a '1031' exchange because 1031 is the IRS Code Section that governs this roll over. The fact that it is an IRS Code Section means that it is law and if you follow the rules the IRS has to allow your exchange."

So if you dot your "i"s and cross your "t"s, the IRS has to allow it. It's the law.

But be careful, because the inverse is also true. If you use a cheap intermediary that cuts corners, or gives you bad advice, even just a little bit in just one area, the IRS can render your entire exchange TOAST -- and they'll probably do it, too.

--The Experts

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