Articles Tagged with 1031 exchange

The Massachusetts Court of Appeals, located in Boston, affirmed summary judgment in favor of an attorney in a legal malpractice case.  In Scanlon v. Dukess, a real estate investor sold a property in Brockton, Massachusetts and sought to purchase a replacement property in order to defer capital gains tax on the sale, which is permitted by federal statute 26 U.S.C. § 1031 and is known as a ‘1031 exchange’.

Under that statute, the investor had to identify to the IRS possible replacements within 45 days of the sale of the Brockton property and then complete the purchase within 180 days.  The investor listed three properties, but only one in Taunton, which was leased by a drugstore, qualified for a 1031 exchange.

After the 45 days had passed, the investor consulted his long time attorney about the purchase of the Taunton property.  The attorney advised him that he would have to assume the existing lease, but failed to inform him that the lease did not contain a condemnation clause, which would prevent the drugstore from sharing in the proceeds of an eminent domain taking.  The investor purchased the property on the final day of the 180 day period.

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