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An exchange is the act of trading one parcel of real property owned exclusively by one party for another parcel of real property owned exclusively by another party.
Under the Deed Tax law, an exchange has been historically handled as if it were two separate transactions. Each party, functioning as a grantor, conveys legal ownership of his or her real property to the other party with a deed. Therefore, each party, functioning as a grantor, is responsible for paying tax on the transfer document.
For this type of exchange
The basis for tax is
Fair market value of the real property given
Property plus cash consideration
Fair market value of the real property given, plus cash consideration
United States law IRC Code Section 1031 property exchanges allows properties to be transferred to a qualified intermediary prior to being transferred to a buyer. The following interpretations apply in determining the consideration for these transfers.
Deed transferring property to the intermediary should be taxed based on the value of the real property being conveyed.
Deed transferring property to the buyer from intermediary should be taxed based on the fee charged by the intermediary.