Terry exchanges real estate (acquired on August 25, 2013) held for investment for other real estate to be held for investment on September 1, 2019.None of the realized gain of $10,000 is recognized, and Terry's adjusted basis for the new real estate is a carryover basis of $80,000.Consequently, Terry's holding period for the new real estate begins on August 25, 2013.

Question

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When real estate held for investment is exchanged for other real estate held for investment, under Section 1031 of the Internal Revenue Code, any realized gain is not recognized and the adjusted basis of the new property is the carryover basis from the old property. Additionally, the holding period of the new property is considered to have begun on the same date as the old property.

Terry Exchanges Real Estate (Acquired on August 25, 2013) Held